#15 — For the National Flood Insurance Program (NFIP) to Succeed

by | Jan 11, 2018 | Uncategorized |

The original objectives of the NFIP were to;

  • constrict unwise floodplain development,
  • to ensure that property owners could receive insurance coverage at a reasonable cost,
  • to get a large number of communities and property owners to buy insurance, and
  • to base premiums on federal assessments of flooding risk so people would be aware of and bear the cost of the choices they make.

The NFIP has three main components:

  1. Hazard identification and mapping: The NFIP conducts engineering studies and constructs flood maps to assess flood risk.
  2. Floodplain management criteria and mitigation: The NFIP establishes minimum structural requirements for buildings within certain flood hazard areas. For example, it requires “substantially damaged” properties (receiving claims worth half their value) in high-risk areas to relocate or elevate. In some circumstances, the program can also provide funding for mitigating a building’s flood risk.
  3. Flood insurance: Participating communities must agree to adopt NFIP regulations. Most NFIP insurance policies are sold and serviced by private insurers under FEMA’s Write Your Own program. However, these companies primarily serve an administrative function, and thus do not bear the risks associated with paying claims.The program attempts to do more than a traditional insurance program. It is meant to be; A comprehensive national flood risk management program with components of Insurance, Risk Assessment, Flood Hazard Mitigation and Community-level Land use aimed at reducing and managing flood risks into the future. Herein lies the problem; it attempts to be too many things and so doing, is failing.

To succeed on all these levels requires;

  • Detailed, current information on property location and local flood-hurricane forecasts;
  • Information on the building type and its construction materials;
  • Strict procedures and standards for underwriting the risk of each property against local data/models available now and future;
  • Risk assessment metrics based on local property, block or regional climate forecasts;
  • Mitigation options that are tailored to the property location against its risk;
  • Current vulnerability maps for communities that show by land (and property) use, the degree of risk now and future 100+ years;
  • Local building and land use codes that reflect the current and future degree of vulnerability;

NFIP needs the above, in our opinion, to fully assess the risk and to be fiscally responsible to:

  • the taxpayers,
  • Congress and the Congressional Budget Office,
  • the insurance purchasers and all affiliated companies, (mortgage lenders, insurers)
  • organizations (local governments, consultants, individuals and real estate professionals) who look to establish a fair method to pay for flood risk now and in the future.

Climate.IQ recognizes this and is focused on building its technology location-based risk platform to reflect the needs of NFIP. We understand that this is a complex set of needs; NFIP’s goal (through FEMA) should be able to show clarity and accuracy and a path forward that makes fiscal sense to ALL parties.

To that end, suggested changes to succeed could include some of the following policy suggestions:


NFIP (FEMA) Comprehensive National Flood Risk Management Program:

  1. Insurance
    • FEMA could look at mechanisms (flood risk maps) that encourage high-risk policyholders to consider relocating, or that provide incentives for taking mitigation actions that will protect their property from flood damage over the long term.
    • Local governments could consider higher real estate taxes for high-risk locations.
  2. Risk Assessment
    Properties that would be designated as located within a floodplain but for a flood protection system like dams and levees should be subject to the mandatory purchase requirement.
  3. Flood Hazard Mitigation
    • Congress should consider allowing some of the fee that is used to fund NFIP reserves to be used for mitigation of the most at-risk properties, particularly those of low-income policyholders.
  4. Resiliency
    • FEMA’s focus should be on mitigation and protecting those in harm’s way.
  5. Community-Level Land Use
    • Communities should be encouraged to undertake resiliency measures.SmarterSafer has recommended a sliding scale for disaster assistance as a way to incentivize communities to become more resilient.
    • This should be coupled with changes to NFIP to build resiliency.

With NFIP’s legal authorization extended until December 8, 2017, Congress has an opportunity to make some reforms and commit to tightening up its information provided. The biggest change would be to have premiums reflect the actual overall risk. Previous attempts to increase their cost over just a few years faltered after policyholders and their elected representatives pushed back.


References:

Affordability of National Flood Insurance Program Premiums: Report 1 — Summary — 2015

FEMA — The Write Your Own (WYO) Program

The Hutchins Center Explains: National Flood Insurance Program — October 10, 2017

FEMA APPENDIX A: ENSURING CONSISTENCY WITH THE STANDARDS OF THE NATIONAL FLOOD INSURANCE PROGRAM (NFIP) — October 8, 2015

NY Times: “How Federal Flood Insurance Puts Homes at Risk” — AUG. 31, 2017