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Opinion: To save flood insurance for all, Congress needs to reform the National Flood Insurance Program now


Missourians are no stranger to floods and high water. In fact, flooding is the most common natural disaster across the United States. 

As spring arrives and severe weather events become more common, it is more important than ever that our government takes responsible steps to help communities recover and prepare for flooding events. 

The most important program involved is the National Flood Insurance Program (NFIP). The NFIP is administered by the Federal Emergency Management Agency (FEMA) and provides federally backed flood insurance coverage for homeowners and small businesses in more than 22,000 communities across the country. 

While private insurers generally have latitude to raise rates or refuse coverage on problem properties, FEMA may not refuse to cover a repeatedly flooded building and, for the most part, may not adjust rates to align with the number losses or total value of claims.

On the one hand, these restrictions on raising rates help keep insurance premiums low for many individuals and communities who may be grandfathered in. But over the years, it is becoming clear that the current policies of NFIP will lead to a financial crisis and possibly destroy the NFIP for everyone. 

These restrictions mean that federal taxpayers, you and I, subsidize the losses of these same properties that have flooded multiple times, and stand a good chance of flooding again.

These high-risk properties, referred to as Repetitive Loss Properties (RLPs), have historically represented a small fraction of all policies but a huge share of flood claims paid through the NFIP. RLPs have historically represented about 1 percent of flood insurance policies, but as much as 33 percent of all claims. A shocking figure. 

For example, a single residential property valued at under $70,000 flooded 34 times in a 32-year period, receiving insurance payments totaling $663,000. The NFIP has paid out claims eight times the value of the property.

This disproportionate share is putting the NFIP at risk. Ideally, the program is supposed to be self-funding, but when costs exceed revenues, the NFIP has to borrow money from federal taxpayers. NFIP is currently deep in the red and owes the Treasury Department over $20 billion.

By allowing this trend to continue, thousands of communities and millions of Americans who are at risk of losing federal flood insurance may be impacted. This could be the mean additional trauma for some communities here in Missouri which rely on flood insurance to help recover from disasters. Swift action is necessary by Congress.

Thankfully, several members of Congress, including Missouri’s own Representative Ann Wagner, have recognized the need to save NFIP and have sponsored  H.R.5776

This legislation is aimed at reducing the cost incurred by Repetitive Loss Properties by establishing collaborative efforts between FEMA and local governments to address the problem jointly through data collection and analysis to implement plans to mitigate the cost of disasters. 

Part of the solution is to identify high-risk areas in the local area so that building developments can be built around there. The legislation has a limited reach, allowing FEMA to concentrate technical assistance and oversight to communities with the greatest needs. 

Another vital reform is aimed at making individual homebuyers aware of the risk of repetitively flooded properties. As it stands, there is no requirement that a seller’s agent verifies if a seller has fully disclosed all flooding information to homebuyers. By providing and making more comprehensive information available to buyers regarding current or past flooding issues and flood zones, homebuyers can become more aware of their flood insurance needs and be kept aware of the risks of flooding prior to purchase. 

Buyers need to be able to completely determine what type of flood zone they may be in and if flood insurance is mandatory. They may not want to buy the property. Mortgage lenders take flood zone risks into consideration when making loans. A seller must ‘faithfully’ disclose all of these material facts. 

H.R.5776  represents commonsense legislation at preserving a much-needed federal program for generations to come. It is time to address the biggest threat to this program, which is the disproportionate share of claims that Repetitive Loss Properties impose. 

I applaud the works of  H.R.5776 sponsors, including Congresswoman Wagner.  

I’m asking that all Missourians should support these reforms and make their support known to their representatives and senators. 

Together, we can save federal flood insurance for all Americans.