We have all witnessed the shocking rise in record numbers of multibillion-dollar natural catastrophes, with the damage from Hurricanes Harvey, Florence and Dorian still being felt across the country. With more storms predicted to form, the time has come for Congress to act to reform the National Flood Insurance Program (NFIP).
It’s been close to two years since Hurricane Harvey made landfall in Texas, destroying thousands of homes and forcing millions to evacuate Houston and other cities. The damage from the storm should have persuaded Congress to take swift action to better prepare for future floods. That didn’t happen, unfortunately, and current federal disaster policy continues to emphasize short-term recovery and ignore long-term planning.
The NFIP is not equipped to handle the financial reality of today’s storms. While the program was originally intended to encourage communities to take steps to progressively reduce the risk of flooding, it has inadvertently done the exact opposite. By providing coverage that doesn’t fully account for the cost of flood risk, the NFIP has encouraged development in flood-prone regions.
The result has been an unsustainable federal program that has had to borrow $40 billion from taxpayers to date, with no feasible chance that it will ever repay that total. Fortunately, there are common-sense ways to address many of the program’s biggest problems. By better aligning rates with risk, allowing greater consumer choice, updating outdated flood maps, and focusing more on pre-disaster planning and mitigation, the NFIP can once again become a stable and productive cornerstone of federal disaster policy.
Congress must help move the program to fiscal soundness by gradually phasing properties to risk-based rates coupled with mitigation assistance and affordability measures for those who are low-income. To prepare for unexpected large-claims years, the Federal Emergency Management Agency (FEMA) should continue to use reinsurance and catastrophe bonds to transfer more of its risk to the private sector.
Americans should not be forced to purchase NFIP coverage where private alternatives — many of them more affordable — exist. A recent study by the actuarial firm Milliman found that even in high-risk states like North Carolina and Texas, the overwhelming majority of homeowners could find more affordable flood insurance in the private market. In the wake of guidance from federal lending regulators clarifying that private coverage can satisfy most mortgage requirements, Congress should be careful not to discourage this growing market.
Accurate flood mapping is also critical to ensuring the safety of tens of millions of Americans who live in flood-prone areas. Because the maps currently used to estimate exposure to flood risk are outdated and inaccurate, an alarming number of at-risk properties lack federal flood insurance. The Congressional Budget Office has found that, of the 166 U.S. counties with expected annual flood claims of more than $2 million, representing 89 percent of the NFIP’s total expected claims, 83 had maps that were more than five years old and 17 had maps that were more than 16 years old. FEMA must be required to update its maps using the best technology and scientific methodology available.
The federal government’s current approach to disaster planning does not work. Rather than continue to reauthorize the NFIP through a never-ending series of short-term resolutions, we need meaningful reforms — like those proposed by SmarterSafer.
With extreme weather expected to increase, maintaining the status quo is dangerous. We can do better. And the time to act is now.