More private insurers should participate and flood map inaccuracies must be rectified—both were the major points in a Congress panel held Thursday discussing the future of the National Flood Insurance Program (NFIP).
Sen. David Vitter, R-La., called the hearing. The Senate panel interviewed members of the Federal Emergency Management Agency (FEMA) and small business leaders, looking for ways to improve upon the flood insurance program.
"Going forward, we need to find a way to deal with the solvency of the NFIP in a responsible way" without placing "this burden solely on the back of policyholders," said Vitter. "It is important that we examine how FEMA spends every dollar of premiums paid into the system."
Vitter believes that private insurers resorted to “cherry picking”—choosing policies with the lowest risk and leaving the federal program with the higher-risk ones—hence the solvency issues with the NFIP.
To this, Association of State Floodplain Managers chair Ceil Strauss suggested that private insurers only be allowed to operate in areas that use the NFIP. She also recommended that Congress assess a fee on insurers to help pay for the ongoing mapping of floodplains under a provision in Senate Bill 1679.
While the NFIP is up for reauthorization in September next year, it is facing a $23 debt resulting from the various disasters the program had to cover for the past 11 years, reported nola.com
Changes to the NFIP would greatly affect Southeast Louisiana—particularly New Orleans, which was subjected to intense flooding during the onset of Hurricane Katrina. When FEMA altered the city’s flood map in 2012 and 2013, the modifications nearly made flood insurance premiums in certain areas skyrocket. Public outcry forced FEMA to revise the flood map, moving more than half of the city’s properties previously classified under “special flood hazard areas” out of the designation. City Council approved this iteration of the flood map in May.
After Sandy, Congress passed the Biggert-Waters Flood Insurance Reform Act of 2012 in an attempt to assess flood risks more accurately, among other things. The law, however, sought to achieve this by increasing rates for policyholders by as much as 25%, threatening the real estate and construction industries as well.
"The worst thing in real estate is uncertainty, and that's what it created," commented Baton Rouge-based real estate broker David McKey during the hearing.
During the hearing, senators asked FEMA deputy associate administrator Roy Wright to take note of the methods North and South Carolina used to map their floodplains and to consider allowing the states to have a hand in creating the flood maps.
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