Congress Must Extend and Reform the National Flood Insurance Program

July 11, 2018 | 4:44 pm
Bob McMillan/ FEMA News Photo
Rachel Cleetus
Policy Director

Update 8/1/18: Following a House vote last week and a Senate vote yesterday, the National Flood Insurance Program has been extended for four months, through November 30, 2018. This so-called “straight extension” does not include much-needed reforms to the program. Here is our statement: Frontline Floodplain Communities Continue to Wait as Congress Dithers on NFIP Reforms

The National Flood Insurance Program (NFIP) is up for re-authorization by the end of July. As flood risks grow around the nation, it’s time for Congress to reform and update this vital 50-year old program to better protect people and property. Without appropriate action, a warming climate coupled with rapid development in floodplains will raise the human and economic toll of flood disasters while taxpayer dollars are squandered on risky, business-as-usual investments.

Why the NFIP is so important

Last year’s devastating hurricane season brought unprecedented flooding to Texas, Florida, and Puerto Rico. This year, we’ve already seen terrible floods across the nation, in the Midwest, in Ellicott City, MD, in California and many more places. The NFIP is critical to getting people back on their feet after these types of disasters. And now Congress must pass reforms to the program also help ensure that it works to limit harms going forward.

In previous blog posts here and here, I’ve explained how the NFIP is more than just an insurance program, it’s intended to be a floodplain management and flood risk mitigation program. And today, with just over 5 million flood insurance policies in force, it’s the single largest source of flood insurance for homeowners and small businesses—making it vital for the economic well-being of communities.

Why reforms to the NFIP are essential

Unfortunately, over the years, Congress has failed to make adequate investments in accurate flood risk maps. That means that many Federal Emergency Management Agency (FEMA) flood risk maps are seriously outdated and even the updated ones don’t reflect future conditions such as projections of sea level rise. It has also underfunded and failed to incentivize measures to encourage homeowners and communities to reduce their flood risks.

Outdated maps, subsidized flood insurance premiums and repeated payouts for business-as-usual rebuilding in floodplains after disasters have masked communities’ awareness of their flood risks and blunted incentives to reduce those risks and limit development in areas prone to flooding.

The NFIP was originally conceived as a program that would help homeowners access affordable flood insurance coverage (at a time when the private sector was increasingly unable to provide this service) and reduce future flood risks by incentivizing risk-mitigation measures and discouraging development in floodplains.  It was never designed to cope with the types of extreme flood disasters the nation has experienced recently, relying as it does on affordable insurance premiums and modest Congressional appropriations for its budget.

A series of major storms—including Hurricanes Katrina, Rita, Sandy, Harvey, Irma and Maria—have had a dire effect on the program’s finances, forcing it to borrow ever-increasing amounts from the US Treasury. Last year, $16 billion of the NFIP’s debt to the Treasury was forgiven, the first time this has happened. The program’s debt stands at about $20.5 billion now, although claims from last year’s hurricane season are still not fully resolved.

Meanwhile flood risks are growing in many places around the nation. A recent report from the Union of Concerned Scientists finds that, in just the next 30 years, hundreds of thousands of coastal homes and commercial properties worth billions of dollars are at risk from chronic flooding worsened by sea level rise. In many inland areas, heavy rainfall events are also on the rise due to climate change, contributing to growing flood risks in non-coastal communities.

Another recent study found that the total US population exposed to serious flooding is significantly higher than previously estimated. According to the study: “Nearly 41 million Americans live within the 1% annual exceedance probability floodplain (compared to only 13 million when calculated using FEMA flood maps).”

Both along the coasts and in inland floodplains, growing development in flood-prone areas is exacerbating exposure to flood risk by putting more people and property in harm’s way and reducing the ability of our landscapes to naturally absorb water.

All these challenges together are threatening the viability of the NFIP in its current form. But with the right reforms, the NFIP can play a vital role in making our nation more flood-resilient. What’s more, Congress can ensure that taxpayer dollars invested through the program are spent wisely to limit the costs of future disasters.

How Congress can fix the NFIP

These five reforms to the NFIP would go a long way to making the program more effective, equitable and science-based, while ensuring taxpayer dollars are well spent:

  • Updating flood risk maps nationwide using the latest technology and to reflect the latest science, consistent with the recommendations of the Technical Mapping Advisory Council. Congress will also need to appropriate sufficient funds to make this possible.
  • Phasing in risk-based insurance premiums and expanding the number of people carrying insurance to ensure adequate coverage for the growing numbers of homes exposed to flood risk, and to put the program on a more financially and actuarially-sound footing.
  • Addressing affordability considerations for low- and moderate-income households through targeted vouchers, rebates, grants and low-interest loans for flood mitigation measures. FEMA’s recently-issued affordability framework provides some useful guidance, as do reports from the National Research Council.
  • Providing more resources for homeowners and communities to invest in reducing their flood risks ahead of disasters, including expanding funding for voluntary home buyout programs especially in places that flood repeatedly. Budgets for FEMA’s pre-disaster mitigation program and flood mitigation assistance programs should also be expanded.
  • Ensuring that a well-regulated private sector flood insurance market complements the NFIP without undermining it, including mandating that private insurers contribute to flood mapping fees and provide coverage at least as broad as NFIP policies.

Bills before Congress

There are several bills under congressional consideration currently, including three in the Senate—the Cassidy-Gillibrand bill (S.1313 – Flood Insurance Affordability and Sustainability Act of 2017), the Sustainable, Affordable, Fair and Efficient National Flood Insurance Program Reauthorization Act (SAFE NFIP) 2017 co-sponsored by a bipartisan group of senators, and the Crapo-Brown bill (The National Flood Insurance Reauthorization Act of 2107)—and the House (the 21st Century Flood Reform Act).

More details on the bills’ provisions are here.

None of these bills on their own deliver the full set of reforms needed and there are clearly deep differences in the House and the Senate versions.

Of particular concern are attempts in the House bill to promote private flood insurance at the expense of weakening the NFIP, rather than ensuring that the private insurance market and the NFIP work side-by-side to increase the number of people with robust insurance coverage.

Efforts to move toward risk-based insurance premiums must be accompanied by strong affordability provisions for low and fixed income households, as well as enhanced resources for flood mitigation measures. Without these provisions, those who can least cope with the impacts of flooding will be unable to afford insurance or unable to take steps to reduce their risks. There is bipartisan support for better flood risk maps, but Congress must commit to adequate budgets for FEMA to carry out this important work.

Reasonable people on both sides of the aisle should recognize that communities need help coping with growing flood risks, and a robust, reformed NFIP must be an important part of the solution.

Legislation requiring the US Government Accountability Office (GAO) to study the issue of voluntary home buyouts is also pending and should be passed.

Time to stop punting on much-needed reforms

Since the end of the last fiscal year in September 2017, the NFIP has had six short-term re-authorizations—the latest of which ends on July 31. Each time, Congress has failed to wrestle with much-needed reforms. The version of the Farm Bill that recently passed the Senate included a provision for  “straight re-authorization” to extend the NFIP for six months without any reforms. It is unclear as of now if the House will adopt a similar proposal.

Congress must stop punting on much-needed reforms to the NFIP so that the program can serve the nation well in the decades ahead. Communities on the frontlines of worsening flood risks need help now and they don’t have unlimited time to wait as Congress dithers.