In its efforts to tackle flood insurance reform, the House Financial Services Housing and Insurance Subcommittee hosted Roy E. Wright, deputy associate administrator for insurance and mitigation at the Federal Emergency Management Agency (FEMA) on March 9 to testify on FEMA’s efforts to transform the National Flood Insurance Program (NFIP).
Congress must renew the NFIP by Sept. 30, 2017, or it will expire.
“Flooding is the most frequent and expensive disaster in the United States,” Wright said in prepared remarks. “Ninty percent of natural disasters in the United States involve a flood. Homeowners insurance does not typically include coverage in the event of flooding, and historically flood insurance was not widely available.”
In 2016, there was no single “catastrophic” disaster like the ones seen with Hurricane Katrina and Hurricane Sandy; however, Wright stated that the flooding events in Louisiana, Texas and other states during Hurricane Matthew resulted in the third largest claims payout year in the NFIP’s history.
Projected payouts from 2016 total more than $4 billion. The program’s debt to the Treasury now totals $24.6 billion.
“That debt is associated with discounts and subsidies that Congress asked my predecessors to implement,” Wright said. “The idea that future policyholders should have to pay for that debt becomes a difficult mountain to climb.”
Setting the stage for the Republican stance on flood insurance, in his opening remarks, Subcommittee Chairman Rep. Sean Duffy (R-Wis.) summarized common themes he noticed from previous flood insurance reform discussions he had held or participated in, including:
- A lapse in the program would be irresponsible and damaging to communities;
- Policies must be accessible and affordable for those who are in need;
- There’s a strong interest in the growth of a robust private market that can offer consumers choices in flood insurance;
- Communities are frustrated by the accuracy (or lack thereof) of FEMA’s flood maps and the time it takes for maps to get approved;
- Congress should explore new options for mitigation and community resiliency;
- The financial integrity of the program is weak; and
- Congress must address some of the egregious claims-processing problems that the Northeast in particular after Superstorm Sandy.
“A timely reauthorization of the NFIP is the top priority of this subcommittee,” Duffy added. “Hearing FEMA’s perspective on the issues facing the problem – including the accuracy of FEMA’s flood maps and concerns about claim processing problems – are vital as we ready legislation to reauthorize this program, which is so important to millions of Americans.”
Although the need to renew the NFIP seemed to be universally accepted, many took issue with certain directions the program may take under the Trump Administration.
There have been reports from Politico and The Washington Post that the Trump Administration plans to impose a surcharge on NFIP policyholders and cut 11 percent from FEMA to go toward building a wall along the U.S.-Mexico border.
Wright, however, stated that final decisions on Trump’s budget had not been made yet.
“We recognize that the nation faces broad public policy questions around flood insurance affordability, continued development in flood-prone areas, the soundness of the NFIP’s financial framework, and greater private sector participation in flood insurance markets. Through all of this, FEMA’s priority is to increase flood insurance coverage so that disaster survivors can recover more quickly and fully after flood events,” Wright said.