Coalition Urges Modernization of National Flood Insurance Program

By | February 1, 2017

A U.S. flood insurance program that is drowning in billions of dollars in debt can be modernized to bolster its finances while curbing the public’s exposure to flood risks, a national coalition said in a reform proposal unveiled on Wednesday.

The plan by Washington-based calls for the National Flood Insurance Program (NFIP), to use cutting-edge technology that would more precisely determine flood-prone areas, and to price flood insurance premiums in accordance with those specific risks.

Other measures would include greater involvement by private insurers in the flood insurance market and offering incentives for communities to enhance and restore natural buffers against floods, such as wetlands and forests.

The proposal is among the first in a year that could usher in sweeping changes to the flood insurance program, whose authorization is set to expire in September. The program, operated by the Federal Emergency Management Agency (FEMA), is $24.6 billion in debt to the U.S. Treasury Department, a FEMA spokeswoman said. Most of the debt covered claims from Hurricane Katrina in 2005 and Superstorm Sandy in 2012.

It is unclear which lawmakers may take up the issue as Washington adjusts to a new presidential administration, or how much of the plan would be adopted. However, there is bipartisan support to modernize the insurance program and U.S. Senate and House lawmakers held several hearings last year about possible ways to do it.

The flood insurance program has been a political football in Washington for years, mainly because of the debt, which the government has said is impossible for the program to repay.

The program was temporarily extended 17 times between 2008 and 2012 and lapsed four times during the same period, a pattern that can create uncertainty in real estate markets, some U.S. lawmakers have said.

Federal law requires that homes in flood-risk areas have flood insurance before a mortgage can be completed. The federal program remains the only flood insurance available to the vast majority of Americans, although a small market for private flood insurance is now sprouting in some flood-prone states, such as Florida.

A 2012 law ultimately extended the program to September.

Another law in 2014 allowed FEMA to buy private reinsurance to cover the program if claims surge, among other measures. Last September, FEMA obtained more than $1 billion in reinsurance for 2017 from 25 reinsurers.

The push to further modernize the program has rallied support from diverse groups., for example, is composed of more than 30 organizations ranging from insurers to environmental groups. Members include units of insurers Chubb Ltd. and Swiss Re AG, Reinsurance Association of America, National Taxpayers Union, Union of Concerned Scientists and National Wildlife Federation.

(Reporting by Suzanne Barlyn; Editing by Andrew Hay)

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Latest Comments

  • April 25, 2017 at 12:42 pm
    David Lentz says:
    My Wife And I Pay 1585 per year for flood ins. we have been in our home 18 years, never had a drop of water, but yet its just a few houses on my circle that must have flood in... read more
  • February 1, 2017 at 7:58 pm
    TrumPolarBear says:
    The government needs to be involved in risk mitigation. My thoughts are to migrate exposures out of flood plain over the next few generations by enabling municipalities to bu... read more
  • February 1, 2017 at 1:23 pm
    Dave says:
    Or better yet, get the government out of flood insurance altogether. If it becomes properly priced for the exposures faced, wouldn't it be better handled by the private sector... read more

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