Financial Services Committee Passes Flood Insurance Reform

The National Flood Insurance Program (NFIP) requires significant reform to better protect the nation from the realities of climate change. Sea level rise and extreme rain storms are making flooding more common, threatening people and property and placing financial strain on the flood insurance program. Today, June 12, the House Committee on Financial Services passed a bill with wide bipartisan support to move the NFIP towards meeting this challenge.

The National Flood Insurance Program Reauthorization Act of 2019 affords greater protections to homeowners, home buyers, and the communities in which they are located through the following reforms:

• Raising the amount of Increased Cost of Compliance (ICC) coverage available to policyholders from $30,000 to $60,000 and expanding the eligible use of such funds for voluntary buyouts of flood-prone properties;
• Ensuring that homeowners and home buyers have a right to know their property's flood risk in order to make an informed decision about how to best protect their families;
• Creating state revolving loan funds for mitigation activities, like voluntary buyouts and elevation; and
• Providing for the mapping of future flood risk.

Increased Cost of Compliance Coverage

The NFIP bill includes language that would make voluntary buyouts an eligible activity for ICC coverage. These are funds that policyholders typically use to elevate a property. However, elevation might not be a good option for all properties, especially in face of worsening flood risk. And current buyouts financed through FEMA’s various hazard mitigation programs can be inefficient, reaching far too few families and taking years to complete. Increasing the coverage amount and clarifying that voluntary buyouts are an eligible use would simplify and shorten the buyout process. This would make buyouts a more viable option for residents of flood-prone areas and give those residents more control over their post-flood choices. Policyholders who wish to move out of harm’s way, but who are trapped in cycle of flooding and rebuilding, need more options.

Disclosure and Transparency of Flood Risk

During the bill markup, Chairwoman introduced a manager’s amendment that provided for greater transparency and disclosure of flood risk. The proposed language would give homeowners and home buyers the ability to know a specific property’s flood risk, including a history of past flood damages and insurance payouts. 

This is information that FEMA, the agency responsible for administering the NFIP, can provide if a property was ever covered by the flood insurance program. Yet, FEMA currently does not provide this information to non-policy holders, and even then, the provision of this information is inconsistent. 

In addition, the amendment contained a provision on data sharing with private insurers. If FEMA shares its flood data with private insurers, then private insurers are required to share their flood risk data in return. This information would then be available to a current homeowner, just like the FEMA data, for their property. Homeowners and buyers are better able to make informed decisions about where to live and how to address their flood risk the more that flood risk information is available.

State Revolving Loan Fund 

Extreme rain events are expected to become more frequent and intense in a warming world, creating greater risk of major flooding disasters. Coupled with the impacts associated with sea level rise, communities must have access to the financial resources necessary to adapt to and/or prepare for this risk. 

The bill provides for the creation of state revolving loan funds. States can use the fund to make grants or loans to local communities for mitigation activities, like home elevations or buyouts, to decrease flood risk. Mitigation is an investment with a high rate of return. The National Institute of Building Sciences found that every $1 invested in disaster mitigation saves society $6 in avoided disaster costs. 

Future Flood Risk Mapping

NRDC has long advocated for the inclusion of future flood risk projections as an advisory layer on FEMA-issued flood maps. Currently, such flood maps fail to account for future flood risks that are attributable to sea level rise, increasing incidents of severe weather, and other impacts of climate change. Based on current maps, development decisions that would appear safe today, could face a serious risk of flooding tomorrow. Forward-looking flood maps would better protect people and property and ensure long-term sustainability of the NFIP. The bill would require FEMA to provide financial and technical assistance to communities to incorporate future flood hazard conditions as an informational layer on their flood maps. 

Climate Change Impacts Continue to Exacerbate Flooding, Threatening People, Property, and the Ability of the NFIP to Respond 

Climate change will continue to expose the vulnerability of the flood insurance program. As sea levels rise and heavy rains storms become more common, coastal and riverine communities can expect increasing vulnerability to flooding. While there is still work ahead, the National Flood Insurance Program Reauthorization Act of 2019 is a significant step in the right direction.