FEMA Flood Insurance Program Underwater
Ninety percent of natural disasters in the United States involve a flood. Want to check if your home’s location is in a high-risk flood zone? Thanks to the National Flood Insurance Program (NFIP), you can. NFIP, which is operated by the Federal Emergency Management Agency (FEMA), identifies and maps flood risks, provides flood insurance for 5.1 million policyholders, and runs programs to incentivize flood risk reduction.
However, the program has significant issues, including $24 billion of debt incurred after a series of severe storms and flooding (including 2005’s Hurricanes Katrina, Rita, and Wilma and 2016’s Hurricane Matthew, which caused the third largest claims payout year in the NFIP’s history). With a September 30 deadline looming for the program’s reauthorization and serious consequences for the $1.25 trillion in properties the program insures, congressional committees held a flurry of hearings to discuss reauthorizing and reforming the NFIP.
On Tuesday, as snow and ice fell in D.C., the Senate Banking, Housing, and Urban Affairs Committee held a hearing featuring Mr. Roy Wright (Deputy Associate Administrator for Insurance and Mitigation, FEMA) as the sole witness. He warned that not reauthorizing the program could have severe effects on real estate markets in flood-prone areas and reiterated last week’s concern that there is not a “practical” way to repay debts. He spoke about ways to keep the program from incurring more debt, including improving efficiency and streamlining cost. In doing so he repeated another message — one critical way to reduce cost would be to use new technology to update scientific flood hazard maps for more accurate risk identification. Chairman Michael Crapo (ID) specifically pointed to the remote sensing method Light Detection and Ranging (LIDAR) as a tool to improve FEMA’s use of technology going forward. Mr. Write also pointed out recent improvements in oversight of the program and offered several suggestions for this reauthorization, including passing it on-time (and for multiple years), increasing flood insurance coverage nationwide, and sharing risks with private market insurers. Chairman Crapo and Ranking Member Sherrod Brown (OH) both pledged support for reauthorization. However, there was disagreement across the aisle on how involved the private sector should be, with Republicans seeing the sector’s involvement as a way to ease debt, while Democrats expressed concern that private insurers would pick and choose only the low-risk options. Mr. Wright summed up his thoughts, saying “From a public policy perspective, the more people insured, the better.” However, on Thursday, the president’s Fiscal Year 2018 budget was released, which proposes cutting the NFIP’s Flood Hazard Mapping Program.
Two days later, across Capitol Hill, the Housing and Insurance Subcommittee of the House Financial Services Committee held a hearing focused on the community perspective of flood insurance reform. However, members had just begun to grapple with news that the president’s budget request proposes $1 billion in spending cuts to the U.S. Army Corps of Engineers, which also provides flood protection programs. Democrats and Republicans on the committee had differing levels of concern. Representative Dave Trott (MI-11) was confident the private sector “can fill the void,” and Representative Dennis Ross (FL-15) thought the cuts would show Congress wants an “affordable and accessible” flood insurance market. Ranking Member Emanuel Cleaver (MO-5) called the budget proposal “extremely disappointing” and added, “If anything, we should be increasing congressional support for these vital activities.” Mr. Chad Berginnis (Executive Director, Association of State Floodplain Managers) warned that the cuts would degrade the capability of the program to assess risk, a problem will only grow as maps age. Representative Joyce Beatty (OH-3) pointed out that increased participation by the private sector is problematic because private companies do not contribute to mapping. Mr. Evan Hecht (Chief Executive Officer, The Flood Insurance Agency) offered an idea to include fees for NFIP mapping in private insurer policies to help spread costs. Several bills related to flooding and the NFIP are already making their way through Congress.