Flood Insurance Reforms & the Biden Administration

While the Federal Emergency Management Agency (FEMA) has instituted its flood insurance the National Flood Insurance Program (NFIP) reforming Risk Rating 2.0, the Biden administration wants to throw it out.

A 104-page plan was recently sent to Congress that would totally restructure the NFIP. And the plan starts with the forgiveness of the NFIP’s $20.5 billion debt.

It is currently before the Senate Banking Committee. If passed, the reforms would not allow the NFIP to insure new homes built in a flood prone area. It will also totally drop coverage for homeowners who have filed repeated flood insurance claims.

This will likely stifle new construction in flood prone areas and on the nation’s coastlines. Former FEMA administrator, Craig Fugate supports the plan and said it’s likely development will still be allowed in those areas, it’s just that the NFIP will not insure them. Builders and new homeowners would have to turn to private — and more expensive — insurers.

“This means ending the federal subsidy for new construction,” he said, and pointed out that this will result in premiums that are a more accurate reflection of flood risk. “Let private sector price it, market it, and if you can’t afford private-sector prices for flood insurance, maybe you shouldn’t be building there.”

The administration says ending NFIP coverage for new buildings in flood zones will create “an inventory of new flood risk properties that private property insurance companies could compete for in a marketplace without a subsidized government program.”

Fugate takes it a step farther and says it’s about time we quit subsidizing individuals and businesses in this manner. “The thing about commercial buildings is, why are you as a taxpayer underwriting flood risk to Amazon?” Fugate added.

The big question now is, “will it fly?”

Flood insurance expert R.J. Lehmann of the International Center for Law & Economics doesn’t think it will. “I continue to be skeptical that there’s much movement for significant reform in Congress,” he said. “The voices that are opposed are much louder and more organized than the voices for reform.”

That said, he likes the idea and says the administration is clearly making “a move in the right direction.”

The biggest change would force the NFIP to drop coverage for property owners who’ve filed multiple claims. “The availability of flood insurance creates a moral hazard,” the administration said. “The NFIP must have better tools to address insured structures that have experienced multiple flood claims.”

Under these reforms NFIP coverage will be dropped on properties that have filed four claims of $10,000 or more each.

Fugate — who ran FEMA for the Obama administration — gets the last word. He says, “This is good government.”

Source link: ClimateWire — https://bit.ly/3xJxecP