Letter to Senate Committee on Banking, Housing and Urban Affairs

The Honorable Tim Johnson, Chair
Senate Committee on Banking, Housing and Urban Affairs
534 Dirksen Senate Office Building
Washington, D.C. 20510

The Honorable Richard Shelby, Ranking Member
Senate Committee on Banking, Housing and Urban Affairs
534 Dirksen Senate Office Building
Washington, DC 20510

Dear Chairman Johnson and Ranking Member Shelby:

As you begin to consider reauthorizing and reforming the National Flood Insurance Program (NFIP), the Smarter Safer coalition– a broad-based coalition of taxpayer advocates, environmental organizations, insurance interests and others—asks you to consider our flood proposal in your deliberations (attached).

Our diverse coalition believes that to ensure the continued availability of flood insurance and to better protect taxpayers, the flood program is in need of systemic reform. For over 40 years, the federal government, through NFIP, has provided significant subsidies for flood coverage. This has subsidized development in harm’s way and in environmentally important and sensitive areas; provides a disincentive to risk mitigation; and puts American taxpayers at significant risk. The program is now almost $18 billion in debt with all indications that FEMA will never be able to pay back taxpayers unless significant reforms are made.

NFIP must be reformed in basic areas, including: maps, rates and mitigation. Flood maps serve as the basis for understanding flood risk as well as for determining insurance rates. Many communities and lawmakers have questioned the accuracy of FEMA’s flood maps. We believe that FEMA must do everything it can to update its flood maps and ensure they reflect real risk. For this reason, the coalition supports the creation of a mapping council comprised of experts who over the next two years will devise mapping protocols to ensure that maps are up to date, accurate, based on the best science, and account for actual land use. Under this proposal, maps will be more gradated, reflecting real levels of risk. In addition, it ensures that FEMA does not disregard un-accredited levees in its mapping. In most cases, an un-accredited levee still provides some level of protection, and our proposal requires that the level of protection from these levees be incorporated into maps and rates. Accurate maps not only ensure that flood insurance rates are fair, but they also allow people to understand the real risks of where they live.

We urge you to not include any delay in mapping or mandatory purchase requirements as a result of community concerns. While we agree that much more needs to be done to educate people and communities about the mapping process, we oppose any efforts to delay the implementation of updated maps or the subsequent requirement that insurance be purchased. Delays will not change the basic fact that people are at risk and need insurance protection. We believe that maps should be implemented as they are updated; however, the impacts on flood rates should be eased through rate phase-ins. Our proposal ensures that maps are accurate while phasing in rates for those newly mapped into flood hazard areas. This will help make sure people have needed insurance coverage, but recognizes the need for people to be able to adequately plan for the cost of insurance.

To ensure the flood program can continue to provide needed coverage, subsidies in the program must be phased out. Our proposal phases out all subsidies over a five year period. For too long, the federal government has charged only a fraction of what it needs to pay claims. Many buildings have continued to receive large flood insurance subsidies, despite having repeated claims that at times are cumulatively more than the structure is worth. At this time of deepening deficits, it is irresponsible to continue to provide deep subsidies for any property owner irrespective of need. Taxpayers are not only subsidizing those who cannot pay risk-based rates—they are subsidizing flood insurance rates for million dollar beach homes. By subsidizing those who can afford risk-based rates, the government is undermining the program while asking all taxpayers to provide unneeded subsidies. We urge you to move all properties to risk-based rates and provide explicit subsidies only to those who are in need—and to do so outside of the rate structure.

If rates are based on real risk, the federal government ensures that people understand the real risks of where they live and can also provide incentives to mitigate risk. Once paying a risk-based rate, property owners should receive discounts for undertaking measures that strengthen their homes, properties and communities. We also urge you to put in place effective mechanisms to address severe repetitive loss properties which are a drain on NFIP and taxpayers. Through a structured buy-out program, FEMA can move the highest cost properties from the flood program and can better protect environmentally sensitive and at risk areas. Communities must also be provided the right incentives to protect people and flood-prone land and to help avoid building in high-risk and sensitive environmental areas. The Community Rating System, for instance, should be improved and promoted so that communities are rewarded for land use management and stronger standards to control and reduce risk and for undertaking mitigation efforts.

The flood program must be reauthorized so that we do not continue to face threats of gaps in insurance availability; however, any long-term reauthorization must be paired with meaningful reforms that ensure the program can continue to pay claims without asking American taxpayers for a bailout. We look forward to working with you as you consider changes to NFIP.


List of Coalition Members and Allied Organizations:

Environmental Organizations
American Rivers
Defenders of Wildlife
Environmental Defense Fund
National Wildlife Federation
Republicans for Environmental Protection
Sierra Club

Consumer and Taxpayer Advocates
American Conservative Union
Americans for Prosperity
Americans for Tax Reform
Center on Risk, Regulation, and Markets—The Heartland Institute
Competitive Enterprise Institute

Insurer Interests
Allianz of America
Association of Bermuda Insurers and Reinsurers
Liberty Mutual Group
National Association of Mutual Insurance Companies
National Flood Determination Association
Reinsurance Association of America
Swiss Re

National Low Income Housing Coalition
National Leased Housing Association


American Consumer Institute
Friends of the Earth
International Code Council
National Fire Protection Association
Taxpayers for Common Sense
The Nature Conservancy