Flood Insurance Statistical Arbitrage

Reading Nate Silver's The Signal and the Noise, I've conjured up way to legally beat the government out of some (expected) dollars. This is probably well-known --- yet probably under-exploited.

Executive Summary: If you are in a floodplain related to snow melt, buy your insurance in just those years with substantial snow pack and pass in safer years with lesser snow pack.

Background "Facts": I put the facts in quotes since I am in no way an expert on this problem. You are on your own if you act on my little story. I've thought about this for not much more than 20 minutes.

1. You have a 30 day waiting period between the time that you buy flood insurance and the time it comes into effect. You can't wait until the waves are lapping at the top of the levy, but you can wait to know if you are in a high-risk or low-risk year.

2. In years with minimal snow pack and low predicted river rates, you can consider passing on the insurance, but when record river levels are predicted you can buy the insurance.

3. You'll want to do your own verification of the following:

a. There is no penalty to "going in and out of the insurance pool".

b. The government does not change the rates based on snow pack or other variables than historical losses. Note: The insurance is purchased through an agent, but the insurance provider is Uncle Sam.

Source of Arbitrage: As usual, "It's the Government, Stupid.

Added Note: I like the government, I really do. What I don't like so much is the government providing economic benefits to special subsets of our citizens. If anything, builders in flood plains should pay a Pigou tax for the trouble they are likely to cause.