Flood Insurance Reform Remains Key Congressional Task

November 28, 2018
Hurricane Florence, one of the biggest storms to hit the Carolinas in years, caused major flooding in September 2018, including here in Kinston, N.C. Many thousands of homes and businesses damaged by the region’s floods were uninsured. Photo: National Guard. Click to enlarge.

TipSheet: Flood Insurance Reform Remains Key Congressional Task

EDITOR'S NOTE: This story is one in a series of special reports from SEJournal’s Joseph A. Davis that looks ahead to key issues in the coming year. Visit the full “2019 Journalists’ Guide to Energy & Environment” special report for more.

As multibillion-dollar climate disasters mount, one thing that needs fixing is the way the United States handles flood insurance. And it looked like Congress might get the job done in 2018, until campaigning, partisanship and money got in the way.

So the topic is now on the congressional “to-do list” for the upcoming year. But will the new Congress do any better?

There certainly was no lack of floods in 2018. Hurricane Florence dumped unthinkable amounts of water on South Carolina, North Carolina and other states. Hurricane Michael razed much of Florida’s Panhandle, as much with wind as with water. Severe flooding happened at other times in Maryland, Texas, Mississippi, Alabama and Tennessee.

Disastrously, many of the homes and businesses lost in those floods were not insured — either because insurance was not available or because premiums were too expensive.

Private insurers won’t protect people at rates most people can afford. So the federal solution is supposed to be the National Flood Insurance Program, established by Congress in 1968. Behind the NFIP is a key bargain: The feds will guarantee flood insurance if a community adopts a program for keeping construction out of the flood plain.

It hasn’t worked as well as hoped. Premiums pretty much covered losses until the early 2000s, when they no longer did. That meant either that Congress had to subsidize the NFIP out of the general treasury, or that the program had to run a deficit.

Currently, the NFIP is about $20.5 billion in debt to the Treasury — and that is after Congress forgave $16 billion of NFIP debt in October 2017. The 2017 hurricane season, with Harvey, Irma and Maria, was a doozy.

Numerous reform efforts have failed

The question today is whether such disasters are becoming the new normal.

Sea level rise and hurricane intensification from climate change have made things worse. Flood-plain maps drawn by the Federal Emergency Management Agency (parent agency for the NFIP) have sometimes been politically skewed, and they have yet to reflect all the effects of climate change. That means people collect the insurance payments — and often rebuild in the same flood-prone location.


Low premiums, faulty maps and disaster aid

combine to thwart the intended purpose of

the National Flood Insurance Program:

to get people out of the flood plain.


The whole 2017 hurricane season brought losses of over $282 billion, most of which were uninsured. Political pressure to help after a disaster is enormous — and what Congress typically does is to pass a disaster aid package. It is never enough. Low premiums, faulty maps and disaster aid combine to thwart the intended purpose of the NFIP: to get people out of the flood plain.

Efforts to reform the NFIP have abounded in recent years, but all have failed.

The House passed a package of flood insurance reform legislation in November 2017, but the Senate turned up its nose at it. The House-passed reforms included efforts by Jeb Hensarling (R-Texas), the now-retiring chairman of the House Financial Services Committee, to privatize more of the program. His controversial reform package, which pleased some of the free-marketeers who dominated the House, now appears dead.

As Maxine Waters (D-Calif.) takes over the chairmanship of the House Financial Services Committee, the game will start over. She expressed a desire for NFIP reform in 2018, but it remains to be seen what the committee may come up with in 2019.

Because the politics are difficult, Congress has formed a habit over the years of punting on the hard problem of reform and instead just periodically passing temporary extensions of NFIP authorization. The year 2018 has been no exception: the program is set to expire in a matter of days on Nov. 30.

Two possible vehicles for an extension are the end-of-year continuing resolution and the pending farm bill. Both will be hard enough to pass by themselves, so the add-on of a flood insurance controversy will likely be unwelcome.

Biggert-Waters foundered over rate hikes

If you follow flood control, the name of the incoming House committee chair, Rep. Waters, may ring a bell because of the Biggert-Waters Act of 2012. That effort to reform the flood insurance program, by putting insurance premiums more in line with actuarial reality, resulted in consternation. People complained loudly when their flood insurance premiums went way higher than anybody expected.

Waters, and a lot of other legislators, backed off, and Congress in 2014 ultimately passed a bill “delaying” the rate increases. Not only Waters, but newly dominant Democrats generally, are less likely to push the austerity and privatized version of flood insurance — and more likely to tolerate spending to help people.

Over in the Senate, the politics of flood insurance reform will be different. There it is handled by the Senate Banking Committee, which may still be chaired by Mike Crapo (R-Idaho). Just keeping the NFIP going after Nov. 30 may be the short term goal of a bipartisan Senate coalition. A bill sponsored by Crapo in 2017 was far more modest reform-wise than the House bill. If Crapo moves to the chair of Senate Finance, however, Pat Toomey (R-Pa.) might take over.

Instead of viewing the NFIP through the lens of party and ideology, it sometimes helps to use the lens of geography. Certain coastal states — Florida, Texas, Louisiana, California and New Jersey, for example, have a disproportionately high number of NFIP-insured households.

You can expect legislators from those states to do the heavy lifting, and to be more worried about continuity than reform.

Nor is it an accident that flood insurance falls within the jurisdiction of banking committees in both House and Senate. In flood-prone areas, mortgage lenders want to see flood insurance before they make a loan (especially a federally backed loan).

Whenever authorization of the NFIP lapses, and it has happened a couple of times in recent years, sales of homes and real estate can not be completed, and people get upset. So instead of reform, the NFIP has been subject to years and years of mostly short-term extensions, kicking the can down the road.

But since flood insurance — imperfect as it is — is a “must-have” legislative item, it becomes a valuable hostage for dealmakers on bigger and unrelated legislation such as appropriations.

You can count on some action in Congress this coming year on flood insurance. But you can’t count on it being decisive.

You can find past SEJ coverage of flood insurance issues here.

* From the weekly news magazine SEJournal Online, Vol. 3, No. 43. Content from each new issue of SEJournal Online is available to the public via the SEJournal Online main page. Subscribe to the e-newsletter here. And see past issues of the SEJournal archived here.

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