Flood Risk and Modernization of the National Flood Insurance Program. April 2023
Flooding is the most expensive type of natural disaster in the United States. Between 1980 and 2021, the U.S. endured 36 separate flooding events that each had an economic cost of over $1 billion, with a total economic cost of over $168 billion. (1) The National Oceanic and Atmospheric Administration found that sea levels are increasing at an exponential rate and will likely rise a foot above year 2000 levels by the end of the century, threatening economies, infrastructures, and lives. (2) The Federal Emergency Management Agency’s (FEMA) National Flood Insurance Program (NFIP) is a central part of the federal disaster response apparatus. Its purpose is to offer limited insurance coverage to property owners, renters, and businesses, and encourage communities to adopt and enforce floodplain management regulations and mitigation measures. Unfortunately, the NFIP is overwhelmed with antiquated standards and processes that continue to incentivize people to live and work in harm’s way. FEMA and Congress must reform and modernize the NFIP to ensure that the program has the capacity to assist communities before and after a major flooding event. Below are SmarterSafer’s principles as well as the coalition’s positions and recommendations on recent NFIP reform proposals.
SmarterSafer advocates for common sense approaches to mitigate flood risk, including a long-term reauthorization of the NFIP with meaningful reforms that adhere to the following principles:
- Increase investments in resiliency and pre-disaster mitigation – Investments in resiliency and pre-disaster mitigation offer far more cost-effective approaches than post-disaster recovery and reconstruction efforts. Additionally, protecting existing natural features and investing in nature-based hazard mitigation activities, such as restoration of wetlands, dunes, floodplains and other natural features, improve community resilience to increasing flood risk and reduce the burden on taxpayers in the long run.
- Insure based on risk – Insurance premiums should be established on the basis of accurate risk exposure, including catastrophic flood risk.
- Provide means-based assistance – Increased focus should be paid to low- and moderate- income residents in flood-prone communities to ensure that these residents understand their true flood risk, can afford their premiums, and have access to pre-flood mitigation opportunities and the technical assistance to access mitigation funding.
- Public/private partnerships and risk sharing – Federal agencies including FEMA should have modernized authority to consider and initiate public/private partnerships. In addition, they should have opportunities to share risk with the private sector to increase flood insurance options for consumers and to reduce taxpayer risk.
FEMA Policy Recommendations
- Implementation of Risk Rating 2.0 – Risk Rating 2.0 is designed to deliver rates that are actuarially sound, equitable, easier to understand, and better reflect a property’s true flood risk. SmarterSafer advocates for an implementation of Risk Rating 2.0, recognizing that there are some mapping and risk assessment challenges still being worked through in select locations.
- Means-tested assistance – SmarterSafer endorses FEMA’s updated means-testing framework. An NFIP reauthorization package should include language that supports FEMA’s proposal. FEMA’s plan establishes a program that offers a graduated discount benefit to current and potential policyholders who meet the Department of Housing and Urban Development’s (HUD) definition of a low- and moderate-income household (household income at or below 120% of Area Median Income). SmarterSafer supports FEMA’s plan. The Coalition also encourages FEMA to consider a more tailored focus on low- and fixed-income residents.
- Investments in technology – The development of forward-looking flood risk requires new and modern technology that analyzes and draws conclusions from accurate data. As part of an NFIP reauthorization and reform, FEMA should be required to coordinate more robust information- sharing agreements with other federal agencies, including but not limited to the Department of Defense, the National Oceanic and Atmospheric Administration, the U.S. Forest Service, and the National Weather Service, to ensure that the federal government has a more comprehensive idea of the risks posed by climate change, natural catastrophes including flooding, and the risks borne by communities and taxpayers.
Legislative Policy Recommendations
SmarterSafer supported the following legislative policy proposals during the 117th Congress and looks forward to both reintroductions of the legislation in the 118th Congress and reviewing new measures that prioritize pre-disaster mitigation and resiliency.
- Promote Mitigation Measures – Mitigation is the best long-term defense against flooding. A NFIP reauthorization package and other should include language that authorizes the necessary funding to improve mitigation measures in areas susceptible to flooding and should place a particular emphasis on green, nature-based, and resilient infrastructure. SmarterSafer endorsed H.R. 1797 , H.R.5689, and S.2153 during the 117th Congress.
- Repeatedly Flooded Communities Preparation Act. H.R. 1797 and S.2153 seek to assist communities by updating data for their respective areas, providing grants to assist with infrastructure programs to mitigate flooding, and impose sanctions on communities that fail to comply. Proposals such as these would reduce the severity and financial costs of floods and allow for faster community-wide recovery.
- Updated Mapping – Any NFIP reauthorization package should include measures that allocate funds to assist with updating floodplain mapping in areas susceptible to flooding. Legislation that accelerates generation of new and modern maps, including through the use of best-available technology, will help communities better identify and communicate present and future risks. Communities impacted by flooding must be better informed of accurate levels of risk in order to plan for future disasters.
- Encourage Private Sector Involvement – Any NFIP reauthorization package should include measures that encourage private sector investment into flood insurance or prevention. SmarterSafer endorsed H.R. 4699, legislation 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, among other items. SmarterSafer believes that allowing the private sector to fairly engage in the flood insurance market will create a more competitive market with competitive prices. Additionally, private sector involvement will remove some of the financial pressures from the NFIP and put it on the path to financial soundness. Furthermore, Congress should press FEMA to engage in more risk-sharing opportunities including through the purchase of additional reinsurance coverage. Private sector participants have the willingness and capacity to take on more flood risk to the benefit of the federal government and taxpayers; every opportunity to do so should be given full consideration.
- Improved Resiliency Measures – SmarterSafer endorsed H.R. 481, the Flood Resiliency and Taxpayer Savings Act. This bill seeks to account for future flood risk and incorporate resiliency and mitigation measures when evaluating federally-funded projects. SmarterSafer believes that an NFIP reauthorization package should include measures that consistently require updated data and mapping to best assess risk in flood-prone areas and recognize communities that have invested in resilient infrastructure and mitigation.
- Discourage Future Development in High-Risk Areas – SmarterSafer endorsed H.R. 2632, the Build for Future Disasters Act. This legislation seeks to end NFIP subsidies for newly constructed properties in flood-prone areas, thus discouraging the building of homes in high flood-risk areas. Importantly, the legislation allows for the application of any future means-tested assistance programs for families whose properties are impacted by this change.
- Increasing Purchase of Flood Insurance Policies – Many individuals living in flood-prone areas do not purchase NFIP or private sector flood insurance policies. SmarterSafer welcomes legislation that would seek to increase the purchase of flood insurance policies by requiring property-owners in flood prone areas to purchase flood insurance. Congress should consider a number of approaches to address this issue, including but not limited to a study on the expansion of the current mandatory purchase requirement and an expansion of floodplains that more accurately reflects risk borne by communities.