With the federal program drowning in debt, Congress should welcome private insurers.
|(Steve Ellis is the VP of TCS)|
The federal government’s flood insurance system has been saddled with billions of dollars in debt since Superstorm Sandy devastated the region four years ago. Unless Congress overhauls the program, more than 180,000 at-risk New Yorkers could find it bankrupt when the next storm strikes.
The National Flood Insurance Program (NFIP), which administers flood insurance to property owners in more than 22,000 communities nationwide, has a $23 billion debt that is only going to grow. With the FEMA-run insurance program up for reauthorization next year, lawmakers should fix it before taxpayers have to bail it out.
Congress can start by taking steps to inject more private insurers into the flood insurance marketplace, which would move risks and costs from taxpayers to private capital markets.
The House of Representatives improved the NFIP’s chances for long-term success by passing The Flood Insurance Market Parity and Modernization Act last spring. This bill would level the playing field for private flood insurers by clarifying that private policies can be used to meet flood insurance purchase requirements for those living in flood zones, instead of requiring homeowners to use the one-size-fits-all NFIP.
Now it is the Senate’s turn to follow suit by passing this important bill as soon as it reconvenes post-election.
More competition would allow additional flood insurance options, including potentially lower rates, better coverage and higher coverage limits—allowing New Yorkers to choose the coverage that works best for them. As private flood insurance becomes more common, more people will obtain coverage, resulting in an enhanced private market. That will provide much-needed relief to the NFIP, which has struggled to remain solvent after major payouts from Hurricanes Sandy and Katrina.
In addition to bringing in more private insurers to the flood-insurance marketplace, Congress should implement a national mitigation strategy to cement the NFIP’s long-term success.
A comprehensive mitigation strategy would include strengthening natural storm buffers, preserving green spaces, buying out repeatedly flooded structures and making property-level interventions such as raising at-risk homes. Lower-income policyholders should get financial aid to prepare for severe weather.
|(The Jet Star roller coaster at Seaside Heights, New Jersey during Superstorm Sandy.)|
Proactive measures, such as strengthening infrastructure and updating building codes, would go a long way toward ensuring that communities are ready for the next major storm.
President Obama made headway toward improving America’s resiliency last year by issuing an executive order called the Federal Flood Risk Management Standard, which requires that federally supported buildings and infrastructure be built to withstand the more severe storms expected in the future. This is critical to minimizing the costs—both monetary and human—of future floods and is a great first step, so should be supported by Congress.
Additionally, Congress should work to ensure that the best risk-assessment tools and technology are used to update flood maps. Property owners would not have the burden of determining risk, and the NFIP and private insurers could offer rates that accurately reflect the risk that a property faces.
All 50 states have experienced floods in the past five years, and frequent storms are a new reality to which our nation must adapt. Unless lawmakers act quickly, relief for New Yorkers and others hit by future disasters may soon dry up.