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Rep. Maxine Waters, D-California, chairwoman of the U.S. House of Representatives Financial Services Committee, vowed to resist efforts to significantly raise premiums for coverage under the National Flood Insurance Program.
The NFIP is adopting an approach to rating flood risk – dubbed Risk Rating 2.0 – employed by the private market for years and that can more accurately capture an individual property’s true risk of flood and price that risk more appropriately, experts say.
But Ms. Waters expressed some concerns about the initiative – noting that while the changes to premiums and underwriting have the potential to lower costs for some policyholders, they could substantially raise rates for others – while speaking at the National Flood Conference in Washington, D.C., on Tuesday. She said her concerns were rooted in her previous experience with the Biggert-Waters Flood Insurance Reform Act of 2012, according to a copy of her prepared remarks distributed to the media.
The Biggert-Waters law intended to put the NFIP on a more fiscally sound path, but featured reforms that Congress eventually rolled back amid pressure from their constituents over premium rate increases.
“Changes to risk rating must be undertaken with extreme caution and should always be done with the policyholder in mind,” Ms. Waters said. “I will oppose any efforts to substantially raise premiums or to otherwise add to the affordability burdens that we in Congress are working so hard to tackle.”
The NFIP’s efforts to spread its risk through the purchase of reinsurance drew praise from Ms. Waters, who noted that the program has purchased more than $2 billion in traditional reinsurance and capital markets placements.
But she lamented the inability of Congress to adopt a long-term reauthorization of the NFIP, which has experienced 12 short-term extensions since fiscal year 2017, as well as several brief lapses before being retroactively reauthorized. But Ms. Waters expressed hope that legislators would work on a bipartisan basis on a long-term overhaul of the program, including improved flooding mapping and enhanced mitigation initiatives. Congress passed legislation that would extend the NFIP to Sept. 30.
She repeated her call for Congress to forgive the program’s $20 billion debt, noting that the NFIP pays $400 million every year in interest payments to the U.S. Treasury to “service a debt it can never repay” – money that could be repurposed to provide mitigation assistance, pay claims or make the program more affordable for low-income households.
“I believe the single most important thing we can do to fix the NFIP and bring relief to policyholders is to forgive the NFIP’s debt,” she said.
She also committed to providing the resources for communities to conduct mitigation and floodplain management – with options ranging from state revolving loan funds, grants for technical assistance, insurance funds for buy-outs to congressional appropriations for mitigation assistance all on the table – and making further improvements in mapping with additional funding and the use of the latest technology.
“According to the Federal Emergency Management Agency, everyone is at risk of flooding,” she said. “It is important that flood maps are up to date and modernized so that flood risks are understood and accurately displayed.”
Ms. Waters acknowledged the issues presented by repeatedly flooded properties, which constitute the vast majority of the NFIP’s losses, but noted that many low-income families are forced to reside in flood-prone areas.
“So while I understand that repetitive loss properties need to be provided real options to either elevate or move out of harm’s way, I also want to be sure that we carefully consider the circumstances of the people inside the property,” she said.
Draft legislation for a comprehensive overhaul of the National Flood Insurance Program would strengthen the program’s flood risk mapping and mitigation initiatives, experts say.