TCS Call for Federal Flood Insurance Reform at Senate Hearing on Reauthorizing the NFIP

TestimonyTCS Call for Federal Flood Insurance Reform at Senate Hearing on Reauthorizing the NFIP

Infrastructure,  | Quick Take
May 5, 2017  | 9 min read | Print Article

On May 4th, TCS Vice-President Steve Ellis testified to the Senate Committee on Banking, House, and Urban Affairs at a hearing on the “Reauthorization of the National Flood Insurance Program, Part II.”

Read his full remarks below and read the full written testimony here.

Steve Ellis: Good morning, Chairman Crapo, Ranking Member Brown, members of the committee. I am Steve Ellis, Vice President of Taxpayers for Common Sense (TCS), a national non-partisan budget watchdog. Thank you for inviting me to testify on the National Flood Insurance Program (NFIP). With the recent flooding in several states this hearing is tragically timely. My sympathies are with those affected by the floods.

Taxpayers for Common Sense is allied with SmarterSafer, a coalition in favor of promoting public safety through fiscally sound, environmentally responsible approaches to natural catastrophe policy. The coalition ranges from free market and taxpayer groups to consumer and housing advocates to environmental and insurance industry groups.[1]

The NFIP is nearly $25 billion in debt and must be reformed to ensure it is financially sustainable, has sufficient incentives for reducing future flood damages and vulnerabilities, provides better protection for taxpayers, and that it promotes mitigation solutions that have a long term benefits.

SmarterSafer released a reform proposal in February. TCS supports this proposal and I request it be included in the record. The four main recommendations are:

  1. Risk analysis and mapping must be up to date and must provide property level elevation data.
  2. Rates must be tied to risk, with assistance for mitigation and premium support for low-income homeowners.
  3. Increased federal investments and efforts on mitigation both at a property level and community wide, so that we are reducing rates by reducing risk.
  4. Ensuring consumer choice and private sector competition which will also reduce taxpayer exposure.

Risk Analysis and Mapping

To help people understand their risk and to ensure proper NFIP rates, maps must be up-to- date and accurate, and property elevations (or effective proxies) must be known. Private companies already perform assessments of risk to individual properties—something that is not currently reflected in FEMA maps. FEMA must be required to update its maps, include the best science on known conditions and risks, but also conduct or purchase property or close level risk assessments. FEMA should be required to assess elevation at a higher resolution or conduct more granular risk analysis. This is something that is possible—the state of North Carolina has undertaken a mapping effort where they have not only gotten property level data at a reasonable cost, but they have a digital system to allow property owners to search and understand their risk, potential flood premiums and mitigation options.

Risk-based Rates, Targeting Mitigation and Premium Support

The Government Accountability Office has documented large cross-subsidies, many of which benefit high-income homeowners[2] finding that over 78 percent of subsidized properties in NFIP are located in counties with the highest home values, while only five percent of subsidized properties are in counties with the lowest home values.[3]

Rates in the program must over time be linked to risk while understanding that there may be some in the program who will need assistance in order to pay higher rates or reduce their risk. Masking subsidies with lower rates prevents policyholders from understanding their true level of risk. A 2014 FEMA report noted that the presences of subsidies “removes the incentive to undertake mitigation efforts, thereby encouraging ever increasing societal costs.”

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Instead premium assistance should be targeted to those who need it, and encourage and fund mitigation measures that could serve to reduce rates by reducing risk. These mitigation efforts should also be targeted at higher risk and lower income property owners.

In April, the GAO noted: “Prioritizing mitigation over premium assistance could address the policy goal of enhancing resilience because it would involve taking steps to reduce the risk of the property, thus reducing the likelihood of future flood claims and potentially reducing long-term federal fiscal exposure.”[4]

Also, as rates gradually increase there is more incentive for individuals and to mitigate. We know that each dollar of mitigation reduces post-disaster costs by four dollars or more.[5]

Consumer Choice and Private Sector Competition

The private sector is now writing first dollar flood insurance, even in the highest risk areas. There roughly 20 companies writing private flood insurance in Florida, home to nearly 40 percent of the NFIP policies. A majority of these are writing flood coverage in the highest risk areas.

Competition provides consumers choice in flood policies, instead of forcing homeowners into a one-size fits all government policy. It also takes risk off of taxpayers. I request to include for the record a recent analysis done by the Reinsurance Association of America (RAA) on Florida Citizens Property Insurance Corporation, a state-run, subsidized wind insurer. They reviewed an initiative to get the private sector to “take out” policies – resulting in a two-thirds policy reduction. Instead of choosing only low risk properties, private insurers took out properties across the risk spectrum, including those along the coast in the highest risk areas. This left a smaller, stronger insurance program that could meet its obligations.

Sens. Heller and Tester’s Flood Insurance Market Parity and Modernization Act clarifies that private flood insurance can be used to meet mandatory purchase requirements and puts the regulatory responsibility where it belongs on state insurance commissioners. A version of this bill passed the House last year 419-0.

I strongly believe the burgeoning private flood insurance will lead to more homeowners purchasing needed flood coverage.

Finally, there is no need for the federal government to further extend into the catastrophe insurance market through reinsurance or increasing coverage limits or other means.


There are a number of reforms that Congress should make when it reauthorizes the NFIP to ensure the program is sustainable in the long term. With better, property level mapping, a focus on mitigation and risk reduction, a move to risk based rates with targeted subsidies, and private sector competition, we believe NFIP will be strengthened and more people will purchase needed flood coverage.

[1] Full list of groups is available at

[2] Supra note 5.

[3] U.S. Government Accountability Office. July 2013. Flood Insurance: More Information Needed on Subsidized Properties. (Publication No. GAO-13-607). Retrieved from:

[4] Government Accountability Office. “Flood Insurance: Comprehensive Reform Could Improve Solvency and Enhance Resiliency.” April 2017.

[5] Multi-Hazard Mitigation Council. Natural Hazard Mitigation Saves: An Independent Study to Assess the Future Savings from Mitigation Activities. Available at: