By Lisa Tennyson, Monroe County Director of Legislative Affairs and FIRM Board Member


Congress is currently considering reauthorization and reform of the National Flood Insurance Program. In most discussions, NFIP is represented as a “broke and broken federal program.” This an effective and familiar talking point, but the characterization is unfair and will lead to misguided reforms.

Critics of NFIP repeatedly remind us of the program’s debt, casting flood insurance affordability as an undeserved and/or irresponsible subsidy that is the cause of the insolvency, and arguing that the only solution for saving the program is to eliminate its affordability (the illogical “we-have-to-kill-the-program-to-save-the-program” approach).

Trading away affordable flood insurance for program solvency is a false choice, stoked by special interests who stand to gain from the outcomes of a smaller and weaker NFIP.  Higher NFIP premiums mean a more competitive environment for the pricier private insurance market. A diminished role for the federal government in disaster protection and recovery means a greater reliance of citizens and local governments on high-cost, private-sector insurance and financing products. NPR dubs this “the business of disaster.”  Unsurprisingly, those interests were advanced with the passage of the House bill.

Critics like to talk about the fairness of tax payer subsidies, but let’s make room in that conversation for the fairness of continued tax payer subsidization for the activities and special interests that contribute to rising sea levels, climate change and extreme weather events that damage homes, farms and businesses and disrupt the lives of our families that live in coastal areas.

Let’s recognize the economic heft of coastal communities and the contribution they make to their states’, regions’ and the nation’s economies. Nationally, coastal shoreline counties generate 51 million jobs and 46% of the nation’s GDP.  We generate 56% of the nation’s energy and are home to all of the ports.  In Florida, coastal communities generate 80% of the State’s GDP.  From this perspective, affordable flood insurance is hardly a subsidy program for coastal communities, but rather an investment in economic engines that support their fellow inland communities.

Let’s remember that the vast majority of people who live in coastal communities are ordinary working and middle-class families with modest homes, not “beachfront mansions.”  We are teachers and nurses and first responders and linemen and commercial fishermen and business owners.   Our tourism-driven local economies rely on low paying service sector jobs. Housing in coastal areas is already expensive; rising flood insurance rates exacerbate this.  Are coastal communities only to be home to the wealthy?

Let’s also remember the impacts of property devaluation that comes with expensive and destabilized flood insurance. A Rand study done after Hurricane Sandy concluded that for every $500 in increased insurance premiums there is corresponding property value decrease of $10,000.   For our local governments, property devaluation means significantly reduced property tax revenues, leaving our communities with far less revenue to face the increasing demands of infrastructure hardening and mitigation that we face. With 125 million people, 60,000 miles of roadway and 36,000 bridges in the nation’s coastal shoreline counties, that’s a big population and a lot infrastructure to protect against rising sea levels.

Let’s understand that the program is in debt because it is the only federal program that exists to help the hundreds of thousands of families—our fellow citizens, our neighbors and friends — rebuild their homes and their lives after the flood events like Katrina, Rita, Wilma, Sandy, and now Harvey, Maria and Irma.

Flood is now the nation’s number one natural disaster. Let’s try addressing extreme weather events that create more frequent, more destructive and more expensive flood disasters as the culprit, not NFIP. A weaker NFIP won’t make flood disasters any less frequent or less expensive, but it will result in shifting the risks and costs downward to families and communities.

Let’s recall that NFIP was created when the private market abandoned flood coverage in the 1960’s.  Further, until the HFIAA reforms replaced Biggert Waters in 2013, NFIP was not intended to, or even allowed to operate like an insurance company in that it could not invest premiums in excess of claims or purchase reinsurance. The program never really had a chance to NOT be in debt.

Concern for the financial integrity of the program is warranted. Program proponents want to deal head on with NFIP solvency and advocate for a number of better business practices to reduce costs and increase revenue yet the House “reform” legislation failed to meaningfully address any of these:

  1. Limit WYO private insurer profits. The program would see a huge cost reduction if FEMA stopped paying private insurers 30-40% of all NFIP premium revenue simply to administer policies while assuming no risk.  After Sandy, NPR did an expose on this costly and abusive practice. A subsequent GAO report agreed calling the payout to private insurers “excessive.”
  2. Mitigate repetitive loss properties. The program would see a huge reduction in claims payouts if we can begin to seriously and pro-actively address those properties that experience repeat losses.  These properties represent only 1% of the homes in NFIP, yet constitute about 30% of the claims paid out. Critics often characterize these as repeat payments that rebuild “mansions on the beach” to rationalize away offering them any type of assistance, but typically these are older, lower value homes in the community, built prior to new building codes and elevation standards. Appropriating funding to buy them out, raze them, and eliminate future claims advances both solvency and good flood plain policy.
  3. Stop charging interest on NFIP program debt.  Yes, the program is in debt – to the federal government — a debt that could be easily forgiven, or at least not charged interest.  The interest alone is costing the program $400M a year. Let us redirect those interest payments into mitigation funding to address repetitive loss properties.
  4. Raise revenues to NFIP by encouraging higher take up rates.With 17 million properties in the nation’s flood plain, and only 5 million participate in NFIP, there are about 12 million properties at risk for flood that aren’t carrying flood insurance (mostly due to lax enforcement).  At an average premium of $800 a year, this would raise $10B annually in revenue. And this doesn’t include the potential revenue of marketing coverage for non-risk areas (where 25% of all flooding now occurs.) This revenue-rich, low risk book of business would build the program’s solvency — the program is $25B in debt, solvency could be three years away–yet the House legislation steers all of this business to the private insurance market, leaving NFIP with only the high risk policies and even greater deficits, and no consumer protections against coverage limits or price gouging for those privately insured.

Let’s protect our coastal communities, let’s the strengthen the NFIP’s solvency, let’s put American and Floridian working families over special interests, and let’s make sure we get the mitigation assistance we need to pursue good flood plain public policy.

The Senate’s bi-partisan SAFE-NFIP bill, co-sponsored by both of Florida’s Senators, Senators Nelson and Senator Rubio, does many of these things.  Let’s let the Senate know that we support that bill.

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