Shelter From The Storm
With a dramatic reversal of environmental concerns on the West Coast from drought to flooding this winter, members of the Housing and Insurance Subcommittee of the House Financial Services Committee held a timely hearing to discuss flood insurance reform, specifically the reauthorization and reformation of the National Flood Insurance Program (NFIP), which is due for reauthorization this fall. Flooding is the most frequent and expensive disaster in the U.S., and a delay in reauthorizing NFIP could disrupt property sales in high-risk areas where flood insurance is required.
The program, which is operated by Federal Emergency Management Agency (FEMA), was created in 1968 to reduce the impact of flooding on private and public structures by providing the opportunity for property owners and businesses to purchase flood insurance and by encouraging communities to adopt and enforce floodplain management regulations.
The sole witness, Mr. Roy Wright (Deputy Associate Administrator for Insurance and Mitigation, FEMA), stressed the importance of identifying and mapping flood hazards through scientific and engineering methods and discussed the financial impacts of catastrophic disasters on the NFIP. One of the main points of concern from members in both parties was the estimated annual deficit of the program and the lack of options for repayment. The debt was incurred through increased insurance claims from large storms in 2005 (Hurricanes Katrina, Rita, and Wilma) and 2012 (Superstorm Sandy), which necessitated borrowing from the U.S. Department of Treasury. Mr. Wright said it would be “impractical” to expect policyholders to pay off the $24 billion debt. Conservative members of the committee suggested private sector involvement could play a larger role. Though Democrats and Republicans on the committee disagreed on the precise direction of the program, they agreed on the importance of reauthorizing NFIP before the deadline.