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Bipartisan NFIP reauthorization does not address program’s debt

Flooded home after Hurricane Harvey

The U.S. House of Representatives Financial Services Committee has reached a bipartisan deal for a five-year reauthorization of the National Flood Insurance Program, but the bill does not resolve the issue of what to do about the program’s $20 billion debt.

H.R. 3167, the National Flood Insurance Program (NFIP) Reauthorization Act of 2019, would also overhaul the program by providing flood mapping, floodplain management and mitigation services. The bill is scheduled for markup in the committee on Tuesday afternoon.

The bill would provide $500 million per year over five years for flood mapping and requires the Federal Emergency Management Agency to utilize updated mapping technology, such as LiDAR, to submit an annual report to Congress on the progress achieved in the mapping program, including recommendations to reduce the cost and improve implementation, and to ensure that maps are adequate for identifying future flood risk, according to a summary of the bill.

On the mitigation front, the bill would increase funding for mitigation assistance to policyholders and communities, expand opportunities for buyouts, target resources for high-risk properties and provide premium discounts to policyholders that make their structures more resilient, according to the summary. The bill would provide $200 million each year for five years for the predisaster hazard mitigation program and authorize the FEMA Administrator to supplement its existing Increased Cost of Compliance program, which currently provides up to $30,000 to help cover the cost of mitigation measures to reduce flood risk and enable policyholders to use ICC coverage to reduce their risk before the property floods, by raising the maximum amount available to $60,000.

The bill has “a real emphasis on mitigation,” said Laura Lightbody, director of the flood-prepared communities’ initiative of the Pew Charitable Trusts in Washington. “When it comes to investing in mitigation, the devil is in the details in how that mitigation money is used. The best form of mitigation is not being there in the first place and the second is relocating properties.”

Left unaddressed is the major issue of how to deal with the NFIP’s debt. Last week, Rep. Maxine Waters, D-Calif., chairwoman of the financial services committee, 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.

The NFIP is one of several government programs that are sources of federal fiscal exposure due in part to the vulnerability of the insured property and crops to climate change, according to written testimony provided to the House Committee on the Budget by Alfredo Gómez, director, natural resources and environment for the U.S. Government Accountability Office on Tuesday.

“These programs provide coverage where private markets for insurance do not exist, typically because the risk associated with the property or crops is too great to privately insure at a cost that buyers are willing to accept,” he said. “From 2013 to 2017, losses paid under NFIP and the federal crop insurance program totaled $51.3 billion.”

Early reactions to the bill have been mostly positive, with its bipartisan backing creating optimism that it could move forward in the House and to the U.S. Senate this summer.

“The fact that the committee has put out a bill with the backing of Chairwoman Waters and Ranking Member (Patrick) McHenry is a really positive step … a real indicator it could beyond the committee into the full House with bipartisan support,” Ms. Lightbody said.

The NFIP’s current authority is scheduled to expire on Sept. 30, meaning the program would not be able to sell or renew flood insurance policies, start new mapping, continue certain floodplain management activities or award mitigation assistance after that date, the summary noted. The NFIP has experienced 12 short-term extensions and lapsed twice since fiscal year 2017.

“I think the Waters-McHenry bill is the best chance that we’ve have for a long-time reauthorization in a long time and I would encourage the Senate to work off of this bill, assuming it passes committee and assuming it passes the House without any poison pill amendments,” said Jon Gentile, vice president of government relations for the National Association of Professional Insurance Agents in Washington. “This is a really good bill.”

Separately, FEMA published on Tuesday an in-depth dataset on the NFIP on its OpenFEMA platform, which aims to increase transparency on the agency’s activities — enabled by a move from a legacy mainframe to a modern information technology platform.

“We’ve been able to take the information out of that legacy mainframe and look at our information about policies and claims in a much greater depth than we have in the past,” said Elizabeth Asche, chief of the insurance analytics and policy branch in the Federal Insurance Directorate within the Federal Insurance and Mitigation Administration at FEMA in Washington. “We’ve also received lot of inquiries from academia, from the private sector and from the public for information about NFIP policies and NFIP claims that have been made historically under the program. We wanted to figure out as an organization what data we could share with the public while still protecting consumers’ personally identifiable information.”

The release of the dataset — containing data current as of March 31 — is also part of FEMA’s 2018-2022 strategic plan, which aims to “build a culture of preparedness,” part of which involves closing the insurance gap for flood risk, she said, noting that FEMA’s previous analysis found that only 4% of U.S. residences have NFIP coverage.

“In the high-hazard areas, the residential market penetration rate is a higher at a little under 30%, but that still means that 70% of the people with the highest flood risk don’t have flood insurance,” Ms. Asche said.

About 5.1 million NFIP policies are in effect, with 256,852 policies falling in the nonresidential category.


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