Little consensus to be found on comprehensive flood insurance fix

WASHINGTON — As lawmakers consider reauthorizing the National Flood Insurance Program ahead of its expiration in September, the Federal Emergency Management Agency urged senators to adopt broader reforms to the program. What they got instead was a tepid response. 

David Maurstad, an acting associate administrator at FEMA, testified before the Senate Banking Committee on Thursday to lay out more than a dozen ways that lawmakers could reform the financially beleaguered NFIP, which provides $1.3 trillion in flood insurance coverage for homeowners and businesses across the U.S. 

“Today, as our changing climate poses a serious threat to our nation, and as the number and severity of disasters continues to grow, the NFIP requires structural change,” Maurstad said Thursday in prepared remarks. 

Hurricane Ida damaged the town of Laplace, La., in September 2021. Authorization of the National Flood Insurance Program is slated to expire in September.

Bloomberg News

But lawmakers from both political parties appeared to have serious reservations with various elements of FEMA’s legislative reform proposal, which, if enacted, would permit the federal agency to offer means-based insurance payment plans, prohibit insurance coverage to the most frequently flooded properties, and cancel more than $20 billion in debt owed by FEMA to the Treasury Department. 

“Before I get to my questions, I want to note that I find it unusual that FEMA sent to Congress, unsolicited, 17 authorization bills that, in my view, will do significant harm both to the program and homeowners alike,” said Sen. Bob Menendez, D-N.J. “FEMA’s proposal will lead to more people being uninsured and unprotected against more frequent storms, [and] higher costs for families and higher barriers to owning a home and a small business.” 

Only two Republicans asked questions during Thursday’s Senate hearing. Ranking member Pat Toomey of Pennsylvania, who is set to retire from Congress in 2023, appeared to support some elements of FEMA’s reform proposal, including a measure that would prevent national flood insurance from being offered to what Maurstad described as “extreme repetitive loss properties” — properties that the administrator said were responsible for “disproportionate share of overall losses and have a high risk of future flooding.” 

In his opening remarks, Toomey said that a legislative change prohibiting NFIP coverage for “excessive loss properties” was an “inherently good policy that is worthy of consideration.” 

But other senators — Republicans and Democrats alike — focused their questions around the experience of their constituents who had recently participated in the NFIP. Lawmakers appeared particularly sensitive to any policy changes that may increase homeowners’ costs to participate in the program. 

Sen. John Kennedy, R-La., pressed Maurstad for details on the agency’s Risk Rating 2.0 system within the NFIP, a new methodology for establishing flood insurance premiums that has raised some consumer’s premiums and lowered others. 

“Why won’t FEMA share its algorithm with the American people?” Kennedy asked. Maurstad replied that the agency had “put forward, on our website, the methodology” behind Risk Rating 2.0, which Kennedy disputed. 

“I want the algorithm so I can hire somebody to review this algorithm to see what clairvoyant people are telling us about climate change and what’s going to happen in America over the next 150 years,” Kennedy said.

Sen. Mark Warner, D-Va., also echoed complaints from his constituents about Risk Rating 2.0, telling Maurstad that he had “heard from a lot of communities and actual individual homeowners [that] this new system actually makes it harder for the individual homeowner to be able to calculate what their risk might be.” 

Maurstad claimed that the new system was “less complex than before.” Warner replied: “Well, I just have to tell you that I hope that is the case.”

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