Claims Journal Viewpoint: The Imperative of Long-Term NFIP Reform
Flood
Background
Flooding is the most expensive type of natural disaster in the U.S. Since 1980, inland flood events alone have cost taxpayers approximately $2,199.7 billion. [1] The National Oceanic and Atmospheric Administration (NOAA) estimates that, by the end of this century, global mean sea levels are likely to rise at least one foot above levels seen in the year 2000, which has the potential to cause devastating flooding and resulting damage across the U.S., in coastal and inland communities. [2] These statistics highlight the urgency to address flood risk, particularly as extreme weather patterns caused by climate change may increase flood events and the associated consequences.
The National Flood Insurance Program (NFIP) is a central part of the federal disaster response apparatus. The purpose of the NFIP is to offer affordable insurance coverage to property owners, renters, and businesses, including more than 5 million homeowners nationwide. The NFIP is also intended to encourage communities to adopt and enforce floodplain management regulations. The growing strength of floods and hurricanes is increasingly straining the financial health of the NFIP. Over the past twenty years, the program has been hit with major losses from a series of powerful storms, including Hurricane Katrina ($16.3 billion), Hurricane Harvey ($8.9 billion), Superstorm Sandy ($8.8 billion), Hurricane Irene ($1.3 billion), and Hurricane Irma ($1 billion). [3] Unfortunately, the situation has resulted in the NFIP paying out claims at an unsustainable rate, borrowing approximately $40 billion from U.S. taxpayers to date. [4] The 2021 hurricane season proved to be one of the most intense since 2017, claiming 145 lives, over twice the amount of 2020. The 2022 hurricane season, which started on June 1, is predicted to be another “above average” season and SmarterSafer urges all communities to prepare accordingly [5].
Solutions
Because the vast majority of natural disasters in the U.S. stem from floods, hurricanes, and other severe storms, policymakers at the federal, state, local, Tribal and territorial levels must work collectively to better prepare for flood risks. Pre-disaster mitigation is a far more cost-effective approach than post-disaster recovery and rebuilding efforts. Additionally, nature-based mitigation efforts, including the restoration of wetlands, dunes, and other coastal barriers, make communities more resilient to increased flood risk.
FEMA and Congress must do more to reform the NFIP. Enhanced and accurate floodplain mapping, for instance, should include projections for future conditions. With the start of FEMA’s Risk Rating 2.0, a redesigned program that focuses on equity across the board and frees lower-income communities from subsidizing for coastal, high-income neighborhoods. Additionally, policymakers should adjust NFIP premiums to reflect accurate levels of risk with means-tested assistance for those who cannot afford actuarial rates; and expand the role of private insurance to close the protection gap and help ensure rates reflect the true risks for disaster-prone communities.
Policy Recommendations
- Prioritize pre-disaster mitigation efforts, including nature-based mitigation.
- Reform the NFIP to ensure premiums reflect accurate levels of risk and expand the role of private insurance.
- Modernize and improve floodplain mapping.
- Impose limitations on new construction inside FEMA floodplains.
- Develop a means-tested assistance program for those who cannot afford actuarial rates.
- H.R. 4699, to amend the National Flood Insurance Act of 1968 to allow for the consideration of private flood insurance for the purposes of applying continuous coverage requirements, and for other purposes.
- H.R. 481, the Flood Resiliency and Taxpayer Savings Act, to account for future flood risk and incorporate resiliency and mitigation measures when evaluating federally funded projects.
- H.R. 2632, the Build for Future Disasters Act, to end NFIP subsidies for newly constructed properties in flood-prone areas.
