Federal agency recommends FEMA review mandatory flood insurance requirements

Some floodplain maps are outdated and do not reflect current risks, it is suggested

Federal agency recommends FEMA review mandatory flood insurance requirements

Catastrophe & Flood

By Lyle Adriano

The US Government Accountability Office (GAO) – a nonpartisan government audit agency – has released a new report, which recommends that the Federal Emergency Management Agency (FEMA) reconsider the mandatory purchase requirements of the National Flood Insurance Program (NFIP).

The NFIP requires homeowners with federally regulated mortgages to purchase flood insurance for properties that are situated in areas of high flood risk. However, GAO noted in its report that some of FEMA’s floodplain maps are outdated. The agency also mentioned that FEMA’s floodplain maps also “do not reflect how climate change may affect flood risk.”

GAO also stated that under FEMA’s mandatory purchase requirement, homebuyers and owners cannot take loans out for their high flood risk properties unless their lenders can verify that they have flood insurance; at least 10 federal entities oversee lender compliance. It was noted that regulators have frequently identified violations related to a lack of or insufficient flood insurance coverage for properties subject to the requirement. Once these violations are identified, lenders are required to take “corrective actions,” and may have to impose monetary penalties on repeat offenders.

However, FEMA does not effectively use this compliance information to address the issue of noncompliance, GAO found.

“Information currently maintained by FEMA and other federal entities could help inform FEMA on noncompliance trends and patterns and help FEMA to develop strategies to address them,” the agency said in its report. “By using internal and external information to better understand compliance with the requirement, and facilitating the sharing of this information among the federal entities with responsibilities related to the requirement, FEMA may help reduce instances of noncompliance, increase consumer participation, and limit the federal government's fiscal exposure to future flood losses.”

“Congress should consider requiring FEMA to evaluate how updated flood risk information could be used to determine which properties must have insurance,” GAO ultimately recommended in its report.

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