Senate Hearing Tackles National Flood Insurance Program Reauthorization

The Senate Committee on Banking, Housing, and Urban Affairs recently held a hearing titled, “Reauthorization of the National Flood Insurance Program: Local Perspectives on Challenges and Solutions,” where testimony was delivered in efforts to enact a long-term reauthorization of the National Flood Insurance Program (NFIP).

Witnesses on the day who testified on behalf of an extension of the NFIP included Michael Hecht, President & CEO of Greater New Orleans Inc.; the Honorable Steve Patterson, Mayor of the City of Athens, Ohio; and Dr. Daniel Kaniewski, Managing Director, Public Sector for Marsh McLennan.

The NFIP has been extended 28 times since September of 2017, and the latest extension will expire on March 8th of this year.

Congress must periodically renew the NFIP statutory authority to sell flood insurance and borrow funds from the U.S. Treasury to conduct the program. Since September 2017, there have been a series of short-term extensions and three brief lapses in the program’s authority to sell and renew policies. The NFIP can still process and pay claims on flood insurance policies as long as funds are available. FEMA and Congress have never failed to honor the NFIP’s contracts with policyholders.

U.S. Sen. Sherrod Brown, Chair of the Senate Committee on Banking, Housing, and Urban Affairs, kicked off the hearing, noting the challenges and potential solutions to the risks that flooding poses to communities across the country.

“As these leaders know all too well, flooding is the most common and costly natural disaster facing the country. It’s devastating to families, businesses, and communities in every state. And unfortunately, the risk is increasing,” said Sen. Brown. “Outdated flood maps, population growth in at-risk areas, land use patterns, and over-stretched infrastructure all play a role. And whether people want to admit it or not, climate change is only making it worse. It’s making extreme weather events more frequent and less predictable–all across the country.”

Sen. Brown continued by citing recent examples of when flooding issues have impacted the nation’s communities, including:

• Streams overflowing in Rhode Island;
• Torrential rains that poured through homes in San Diego neighborhoods; and
• Flash floods posing risks to many communities across the state of Louisiana.

“Flooding isn’t confined to communities on the coasts, or even on major bodies of water,” continued Sen. Brown. “As we saw in 2022, the same mountains and streams that make our Appalachian towns beautiful also make family homes and local economies vulnerable to flooding in an era of more extreme rainfall. Often the only available land for development in Appalachia is in or near floodplains.”

One of the major discussions of the day was the ramifications of a lapse in the NFIP. As detailed by Hecht in his testimony, “If NFIP lapses, NFIP will lose the authority to provide new flood insurance contracts, and existing policies will not be renewed. NFIP’s authority to provide new flood insurance contracts is a particular necessity based on the mandatory purchase requirement (MPR). This requires property owners to purchase flood insurance as a condition of mortgages made or guaranteed by federal agencies, federally regulated lending institutions, and government-sponsored enterprises. Property owners, both residential and commercial, are required to purchase flood insurance if their property is identified as being in a Special Flood Hazard Area (SFHA) and is in a community that participates in the NFIP. While private flood insurance coverage can now satisfy the mandatory purchase requirement, private flood insurance availability varies nationwide and is limited in many states, and can be prohibitively expensive.”

FEMA continues to advocate for a multi-year reauthorization of the NFIP, and remains ready to support Congress to take bold steps on meaningful reforms that increase the number of Americans covered by insurance by making insurance more affordable; build climate resilience; reduce risk, losses, and disaster suffering; and strengthen the NFIP’s financial framework.

There are approximately six million homes located in special flood hazard areas nationwide, and the National Association of Realtors (NAR) estimates that should a lapse in the NFIP’s authorization occur, it could threaten 1,300 property sales each day.

“NFIP’s reauthorization is consequential to the national housing market and real estate transactions,” added Hecht. “During a June 2010 lapse, about 1,400 home sale closings were canceled or delayed each day, representing over 40,000 sales per month. There are approximately six million homes located in SFHAs and subject to the MPR nationwide.”

Mayor Patterson, in his prepared testimony, explained the importance of flood risk education to homebuyers and potential homeowners as they begin their journey on the path to homeownership.

“Enhancing public awareness and education about flood risks and insurance options is not only a critical aspect of building a sustainable flood insurance program, but is also a shared responsibility that involves collaboration between government agencies, insurers, communities, and individuals,” said Mayor Patterson. “Through a concerted effort to inform and empower property owners, we can work towards reducing the number of at-risk properties that remain uninsured, ultimately fostering greater resilience in the face of potential flooding events.”

Dr. Kaniewski of the law firm of Marsh McLennan, a professional services firm in the areas of risk, strategy, and people, advising clients in 130 countries, cited a number of examples where flood risk was systematically underestimated.

“Despite being one of the most common and destructive natural hazards, flood risk is systematically underestimated, which contributes to inadequate insurance, underinvestment in flood resilience, and policy decisions that, in many cases, may not be helping,” said Dr. Kaniewski in his testimony. “And the gap between economic and insured losses from flood has only been widening. Between 2007 and 2021, only 17% of global flood losses were insured, according to a Marsh McLennan analysis.”

Dr. Kaniewski detailed four major U.S. flooding events that took place in 2023:

• Tropical Storm Hilary was the first such storm to hit southern California in more than 80 years, setting rainfall records for Los Angeles and elsewhere.
• Record rains caused catastrophic flooding in four counties in western Kentucky.
• More than 25 inches of rain fell in Ft. Lauderdale, Florida in six hours, bringing flash floods, overwhelming local water infrastructure, and forcing the airport to close.
• Historic rainfall in Vermont led the state to declare a disaster in all 14 of its counties.

“Gaps in flood risk protection exist not only in insurance coverage, but in resilience measures that can help communities minimize and recover from losses,” added Dr. Kaniewski.

Click here for a complete recap of the Senate Banking Committee hearing “Reauthorization of the National Flood Insurance Program: Local Perspectives on Challenges and Solutions.”