Smarter Safer Coalition Proposes NFIP Reforms as Congress Prepares to Fix the Troubled Program

WASHINGTON ‒ With Congress preparing to consider legislative fixes to the National Flood Insurance Program (NFIP), – the strange bedfellow coalition of environmental groups, taxpayer advocates, emergency management organizations, insurance companies and others – today released a new proposal for reforming the troubled program. The House Financial Services Insurance Subcommittee is expected to hold a hearing on NFIP reform on March 9, 2011.

The NFIP’s ability to provide flood insurance has grown endangered as a result of heavily subsidized insurance rates that encourage development in high-risk floodplain locations and are insufficient to cover the program’s losses. With a debt of over $18 billion, the NFIP is in an increasingly precarious financial situation that threatens its viability. Reform is needed to restore soundness and fairness to this broken program on behalf of taxpayers nationwide.

“Taxpayers have been burdened by fundamental flaws in the flood insurance program for decades,” said Steve Ellis, Vice President of Taxpayers for Common Sense. “The reform plan would actually help people better understand their flood risk, help them out of harm’s way, and help reduce the drain on the treasury.”

“NFIP has very serious problems and the plan would move every aspect of the program in the right direction,” said Eli Lehrer, National Director of the Center on Finance, Insurance, and Real Estate at the Heartland Institute. “For all too long, NFIP has wasted taxpayer money, endangered lives, and subsidized development in environmentally sensitive areas. National proposals like these can stabilize NFIP, protect property, preserve the environment and save lives.”

“Smarter Safer’s proposed NFIP reforms will provide Congress with a road map on how to safeguard American communities and the rivers they depend on. This is especially important as climate change is bringing more frequent and severe floods,” said Shana Udvardy, Director of Flood Management Policy for American Rivers. “Instead of sub sidizing development in the floodplain and coastal areas, Smarter Safer’s road map points the Federal government in the direction of moving people out of harm’s way, protecting and restoring areas that provide natural flood protection, and helping Americans to acknowledge the true risk of flooding.”

“The National Flood Insurance Program was designed to protect people and the environment, yet with regard to the environment, the opposite has been the case,” said Joshua Saks, Senior Legislative Representative of the Water Resources Campaigns at the National Wildlife Federation. “We are glad to work with our Smarter Safer colleagues to advance a proposal that protects the floodplains and environmentally sensitive habitat, and in doing so better protects people and water quality.”

By separating subsidies from the rates rather than incorporating them directly into the rates, people will better understand their risk and make smarter and safer decisions about development; incentives for mitigation will exist; and flood coverage will remain available.

Without reform that establishes risk-based rates for all properties, NFIP will continue down the path to fiscal calamity. Reform is the only way to stabilize the program and restore fiscal responsibility.

Smarter Safer s proposed NFIP reforms are based on principles that protect the financial integrity of the program while preserving environmental values through changes to mapping, rates, subsidies and mitigation:

MAPPING: Maps must be accurate and implemented as soon as they are updated. A Technical Mapping Advisory Protocol (TMAP) Council should be established and propose new mapping protocols within one year to ensure flood maps reflect real risk based on the best scientific data and topography. FEMA would implement TMAP’s recommendations and update all maps to ensure accuracy.

RATES: Flood insurance rates must be risk-based and subsidies should not be implicitly included in the insurance rate structure. All rates should be risk-based within five years, with vacation homes and repetitive loss properties paying risk-based rates within two years and other properties paying risk-based rates within five years. Once rates are risk-based, FEMA must give credit for mitigation measures.

SUBSIDIES: Subsidies must be explicit, targeted and not included in the insurance rate structure. FEMA must establish an explicit subsidy mechanism only for those who truly need assistance based on a combination of income and home value. Surcharges on high-value flood insurance policies will be used to pay for the subsidies.

MITIGATION: NFIP must encourage mitigation of risk as well as the natural and beneficial use of floodplains. FEMA must ensure that severe repetitive loss properties are not a drain on the system through mitigation and a buy-out program. The Community Rating System should be improved and promoted so that communities are required to undertake mitigation efforts.

Please find the Flood Proposals attached to this release. is a national coalition made up of a diverse set of voices united to support environmentally-responsible, fiscally-sound approaches that promote public safety. The Coalition strongly opposes legislative proposals that encourage people to build homes in hurricane-prone, environmentally-sensitive areas by creating new programs that directly or indirectly subsidize their homeowner’s insurance.