Category Archives: NFIP

NFIP is Under Fire

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Lawmakers To FEMA: Flood Plan Overhaul Is ‘Too Little, Too Late’

The Federal Emergency Management Agency is making sweeping reforms to the nation’s flood insurance program in the wake of a series of critical reports on NPR and the PBS series Frontline. But lawmakers say this isn’t enough when private insurance companies are profiting millions of dollars from a program that is already $23 billion in debt.
Sen. Bob Menendez, D-N.J., and other lawmakers say they are considering removing private companies from the National Flood Insurance Program.

“This is a federal program at the end of the day,” says Sen. Bob Menendez, D-N.J., whose constituents were heavily affected by Superstorm Sandy. “It needs to fundamentally transform. And if it cannot do so on its own, then we have to consider legislatively whether we scrap the entire model.”

Lots of Activity re Pending Rise in Flood Ins. Rates

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#1 – See this Wash Post article: Rise in government insurance rates to mirror rising waters, flood debt. Some excerpts from the article:

The government is slowly phasing out subsidized flood insurance for more than a million Americans with houses in flood zones who, in some cases, pay half the true commercial rate.

Some owners say they are angry because their houses near lakes, rivers, bays and oceans were much more affordable with cheap rates that will now increase by as much as 25 percent each year until the premiums equal the full risk of settling down on property mapped as a flood zone.

#2 – Check out the new report on flood insurance from the National Academy of Sciences:

The new report: Affordability of National Flood Insurance Program Premiums: Report 1 (2015)

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Abstract of the report:

The National Flood Insurance Program (NFIP) within the Federal Emergency Management Agency faces dual challenges of maintaining affordable flood insurance premiums for property owners and ensuring that revenues from premiums and fees cover claims and program expenses over time. A new congressionally mandated report from the National Research Council, the operating arm of the National Academy of Sciences, found that these objectives are not always compatible and may, at times, conflict with one another. The report discusses measures that could make insurance more affordable for all policy holders and provides a framework for policymakers to use in designing targeted assistance programs.

Although there are multiple ways to measure the cost burden of flood insurance on property owners and renters, the report found that there are no objective definitions of affordability. Where Congress or FEMA determine insurance premiums to be unaffordable, households paying those premiums might be made eligible for assistance through the NFIP. The report says that it will be up to policymakers to select which households will receive assistance, the form and amount of assistance provided, how it will be provided, who will pay for the assistance, and how an assistance program will be administered.

 

 

 

Update on Flood Ins. Reforms

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FEMA Official: ‘We Are Undertaking Sweeping Reforms’ at NFIP

The Federal Emergency Management Agency said it is working to give every Hurricane Sandy survivor who thinks they may have been defrauded or received less than they were entitled to under their National Flood Insurance Program (NFIP) policy, the opportunity to have their claim readjusted. The federal agency is also undertaking sweeping reforms that will change the way the NFIP is delivered, a top FEMA official said.

Citizen Pressure Yields Changes in NFIP Implementation

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From a local paper in NJ: FEMA agrees to major changes, Sandy victims may benefit. Interesting account of citizen pressure on FEMA to fix the NFIP.

After weeks of criticism from Sandy victims, the Federal Emergency Management Agency reversed course Friday and agreed to a series of flood-insurance reforms that advocates say should benefit victims.

Costly New NFIP Rules Discourage Rebuilding After Superstorm Sandy

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Rebuilding After Sandy But With Costly New Rules. NYTimes, May 8. The discussion of subsidized insurance and issues with older homes is useful to understand some of the rebuilding delays occurring currently.

Here are some excerpts:

It’s been more than six months since Hurricane Sandy hit the East Coast, yet many people whose homes were ravaged by the storm still do not know how to put all the pieces back together.By now, most know how much insurance money they have to work with, though plenty of people are still struggling to get more. But a new federal law that happened to coincide with the arrival of the storm will cause flood insurance premiums to skyrocket and require stricter, and thus more expensive, rebuilding standards

So in the most devastated communities, families are being forced to make difficult financial calculations: can they afford the new flood insurance premiums, which, at worst, can reach as high as $30,000 a year? Do they have the money to rebuild their homes to the government’s new specifications? Does it even pay to stay?

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Two readers called this article to my attention. And Ian McLean from New Zealand pointed out that his country has a similar problem with earthquake insurance in the aftermath of the Christchurch earthquakes.

The High Cost of Rebuilding in High Flood Risk Areas

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The high cost of  insurance for reconstruction is the theme of this article in the NYTimes, Nov. 28, 2012: Cost of Coastal Living to Climb Under New Flood Rules. (Also titled Post-Storm Cost May Force Many from Coast Life.) Some excerpts follow:

New York and New Jersey residents, just coming to grips with the enormous costs of repairing homes damaged or destroyed by Hurricane Sandy, will soon face another financial blow: soaring flood insurance rates and heightened standards for rebuilding that threaten to make seaside living, once and for all, a luxury only the wealthy can afford.

Homeowners in storm-damaged coastal areas who had flood insurance — and many more who did not, but will now be required to — will face premium increases of as much as 20 percent or 25 percent per year beginning in January, under legislation enacted in July to shore up the debt-ridden National Flood Insurance Program. The yearly increases will add hundreds, even thousands, of dollars to homeowners’ annual bills.

The higher premiums, coupled with expensive requirements for homes being rebuilt within newly mapped flood hazard zones, which will take into account the storm’s vast reach, pose a serious threat to middle-class and lower-income enclaves.

The heightened financial pressure has emerged as an unintended consequence of efforts to stop the government subsidization of risk that has encouraged so many to build and rebuild along coasts increasingly vulnerable to extreme weather. Supporters of the effort acknowledged that it would squeeze lower-income residents but said it was vital for the insurance program to reflect the risk of living along the shore.

“The irony is, if we allowed market forces to dictate at the coast, a lot of the development in the wrong places would never have gotten built,” said Jeffrey Tittel, director of the Sierra Club’s chapter in New Jersey. “But we didn’t. We subsidized that development with low insurance rates for decades. And we can’t afford to keep doing that.

[Thanks for Jude Colle for calling it to my attention.]

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