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Senate Committee Examines the National Flood Insurance Program

The U.S. Senate Committee on Banking, Housing, and Urban Affairs recently held the session, “Reauthorization of the National Flood Insurance Program: Administration Perspectives.”

Sen. Sherrod Brown, Chairman of the Senate Banking Committee, and Ranking Member Patrick J. Toomey welcomed David I. Maurstad, Federal Emergency Management Agency Associate Administrator for Resilience (Acting) and Senior Executive of the National Flood Insurance Program (NFIP).

The NFIP provides more than $1.3 trillion in coverage to nearly five million homes and businesses in over 23,000 communities. The NFIP provides flood insurance to property owners, renters, and businesses, and having this coverage helps them recover faster when floodwaters recede.

Natural disasters and climate risk events such as flash flooding in West Virginia and Alabama; flooding in Montana and Yellowstone National Park; ice jam flooding in Alaska; heavy rainfall flooding in Arkansas and Oklahoma; and heavy rain, snowmelt and ice jam flooding in North Dakota and Minnesota have already impacted thousands of homeowners this year, well before hurricane season has begun.

FEMA personnel are already preparing for the 2022 Hurricane Season, expected by The National Oceanic and Atmospheric Administration to be above-normal for activity, as CoreLogic’s recently released 2022 Hurricane Report—which analyzes hurricane and storm surge and wind risk exposure for single-family residences (SFRs) and multifamily residences (MFRs) along the U.S. Gulf and Atlantic Coasts—found that nearly 7.8 million homes with more than $2.3 trillion in combined reconstruction cost value (RCV) are at risk of hurricane-related damages this upcoming season.

On September 30, 2022, the NFIP’s statutory authority to sell and renew flood insurance policies is set to expire. Since the NFIP’s last multi-year reauthorization expired on September 30, 2017, the NFIP has experienced several short-term extensions and three brief lapses. The short-term extensions have been found to be disruptive and cause existing and potential policyholders to lose confidence in the NFIP.

“The National Flood Insurance Program—or NFIP—was last reauthorized on a long-term basis in 2012,” said Sen. Toomey. “That reauthorization expired in 2017. Congress has repeatedly reauthorized the program on a short-term basis—21 times to be exact—that’s no way to run a railroad. So, I’m ready to work with my colleagues on a long-term NFIP reauthorization that reforms this program.”

Testifying on behalf of FEMA, Maurstad is a veteran emergency manager and advocate of building a culture of preparedness across the nation, with 40 years of experience in disaster resilience and the insurance industry. As Senior Executive of the NFIP, he led the largest single-peril insurance operation in the world providing more than $1.3 trillion in flood coverage to more than five million U.S. policyholders.

During his tenure with FEMA, Maurstad has held leadership positions for hundreds of disaster operations, including Hurricanes Katrina, Matthew, Irma, Maria and Michael, tropical storm Harvey and countless catastrophic flooding and wildfire events. David’s expertise in disaster recovery and strategic risk management stems from extensive experience in local government as a Nebraska mayor, state Senator, and Lieutenant Governor.

During his testimony, Maurstad outlined four major areas that reflect the Administration’s priorities for multi-year NFIP reauthorization:

  • Ensure that more Americans are covered by flood insurance by making insurance more affordable to low-and moderate-income policyholders. “Under the current law, FEMA does not have the authority to establish and charge premiums based on a policyholder’s ability to pay,” said Maurstad. “Although the NFIP offers mandatory discounts and cross-subsidies based on factors unrelated to risk, those discounts and subsidies do not take into consideration the policyholder’s financial need and, in fact, can make risk communication difficult because people may equate lower cost with lower risk.”
  • Communicating risk in real-time and providing Americans with tools to manage flood risk. Maurstad stressed the role technology plays in the flood risk space, and basic education on flood risk for prospective homebuyers. “Where it can rain it can flood and raising awareness of true flood risk enables people to make informed decisions about their family and property,” stated Maurstad. “Home buyers and renters may lack awareness about flood risk when they complete real estate transactions. Reforms that would require states to establish minimum flood-risk reporting requirements for sellers and lessors before residential transactions close would address this challenge. As climate change continues to make disasters more frequent and intense, it is vital that we provide people with the tools they need to protect themselves financially as well as physically.”
  • Reducing risk by addressing extreme repetitive loss properties. Maurstad noted that since 1978, nearly 100,000 structures have had two or more paid losses, while nearly 1,000 have suffered 10 or more losses. “The NFIP must have better tools to address insured structures that have experienced multiple flood claims,” said Maurstad in his testimony. “These repetitive loss and severe repetitive loss properties are responsible for a disproportionate share of overall losses and have a high risk of future flooding. About 2.5% of insured properties are considered unmitigated repetitive loss properties. Continuing to cover these types of structures without question contributes to the NFIP’s financial challenges and can increase the risk that families living in those structures will face threats to their lives, health, and safety.”
  • Instituting a sound and transparent financial framework that allows the NFIP to balance affordability and fiscal soundness. Congress has authorized FEMA to borrow from the U.S. Treasury up to $30 billion to pay claims. The NFIP currently carries $20.5 billion in debt to the U.S. Treasury, and pays approximately $400 million in interest expenses annually. “This means we are using the current premiums to pay for past claims,” explained Maurstad. “As currently structured, the program is unable to pay this debt back in full. Canceling the NFIP’s debt provides the program with a solid foundation that can support financial reforms around borrowing authorities, future interest, enhanced liquidity, and an “upper limit” for the size of an NFIP event. These reforms address fundamental structural challenges and are essential to building a viable NFIP.

“The NFIP combats the overall threat of flooding through four related components: Flood insurance; floodplain management; floodplain mapping; and mitigation,” said Sen. Brown in calling for more to be done for those in high-risk areas. “The Bipartisan Infrastructure Bill offers a down payment on new opportunities for communities to help homeowners stay out of harm’s way. But we need to do more. Infrastructure investment was a good start. But because of climate deniers in the Senate and our collective failure to fight climate change, that investment in the infrastructure bill will not be enough.”

Click here for more information on or to view the Senate Banking Committee’s hearing “Reauthorization of the National Flood Insurance Program: Administration Perspectives.”

About Author: Eric C. Peck

Eric C. Peck has 20-plus years’ experience covering the mortgage industry, he most recently served as Editor-in-Chief for The Mortgage Press and National Mortgage Professional Magazine. Peck graduated from the New York Institute of Technology where he received his B.A. in Communication Arts/Media. After graduating, he began his professional career with Videography Magazine before landing in the mortgage space. Peck has edited three published books and has served as Copy Editor for Entrepreneur.com.
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