As Floods Get More Intense, Insurance Is Needed More Than Ever. Will There Be Anyone Selling It?

Sep 14, 2017

Even before Tropical Storm Harvey and Hurricane Irma hit, the National Flood Insurance Program (NFIP) was in trouble — to the tune of $25 billion. And the program is set to expire at the end of the month if Congress doesn't act.

Past weather events like Katrina, Sandy and Tropical Storm Irene, paired with the rising cost of damages, have left NFIP in the red and Congress is now looking for a way to keep the program solvent. 

Vermont officials are keeping a close watch on the talks in Washington as changes to the program could likely have an effect on emergency preparedness and disaster relief efforts throughout the country.

Vermont's assistant NFIP coordinator, Rebecca Pfeiffer, says the program's financial crisis has been a long time coming.

"FEMA was capped basically by Congressional legislation on how much they can increase flood insurance policies per year, and how much they can charge " Pfeiffer says. "And so they weren't able to keep up with the reality [of the cost of flooding damage nationally]."

Pfeiffer says the insurance program now needs an overhaul.

READ: What Is Flood Insurance?

Private insurance companies don't like to cover flood loss because the costs are so high, and so in 1968 the federal government came up with the National Flood Insurance Program. And for a long time it worked.

FEMA offered the insurance coverage, and it gave property owners an affordable option to cover flood loss. But over time the storms got bigger and the property losses mounted.

Because NFIP expires on Sept. 30, Congress has to look at the program, but Pfeiffer says it's unclear how Washington will address such a politically fraught issue.

From 1963 to 2016, there have been 36 FEMA declarations involving flooding made in Vermont. Data retrieved from FEMA Sept. 8, 2017, but does not include 2017 declarations.
Credit Calculation & Illustration, Emily Alfin Johnson; Photo, Rebecca Sananes / VPR

Pfeiffer says it's clear that climate change is contributing to all the storms and the damages they cause, but the political contention around climate change could make it difficult to get consensus on policies that acknowledge that reality.

The Trump administration has already pulled back on its support for some flood mitigation work.

The president stopped support for Obama-era standards that required the government to make infrastructure projects flood proof. And in Trump's proposed budget there was no money for updating FEMA flood maps.

Pfeiffer says the insurance program's deficit should encourage both sides of the debate to sit down, and figure out how this country can prepare for and manage future floods.

"It shouldn't be a political fight, with people saying, 'this is my political stand and I'm not going to budge from it.' ... how do we modernize this program, in a way that's also politically feasible?" — Rebecca Pfeiffer, Vermont's assistant NFIP coordinator

"So I think that if there is a comprehensive effort to reform the flood insurance program, what I hope will happen is that there's a good look and understanding of what the issues are, so it's not just a one-off," Pfeiffer says. "It shouldn't be a political fight, with people saying, 'this is my political stand and I'm not going to budge from it.' I guess that's my concern moving forward with the reauthorization, is how do we modernize this program, in a way that's also politically feasible?"

Vermont Congressman Peter Welch has the same question.

Welch says he wants Congress to think about whether property owners in high risk areas should even have access to the government-sponsored insurance program.

"The solution can't be just more flood insurance," Welch says. "It really means that we're going to have to ask some fundamental questions about land use, about whether we keep re-insuring properties that are located in a flood zone so that we have to re-pay recovery every three or four years, and that's happening to some extent. And we can't insure our way out of this. We've got to be smart."

Total FEMA declarations involving flooding per year. 2017 numbers include declarations made before September 2017. Data retrieved from FEMA Sept. 8, 2017.
Credit Calculation & Illustration, Emily Alfin Johnson; Photo, Rebecca Sananes / VPR

Karen Horn is Director of Public Policy & Advocacy at the Vermont League of Cities and Towns, and she helps municipalities navigate the complexities of the National Flood Insurance Program.

At its core, the program covers property loss, but Horn says when a town signs on to the program the federal government provides all sorts of funding to help deal with flooding.

And when she hears about a $25 billion deficit and about proposed changes, she worries that Washington will make decisions that have a real impact around Vermont.

"It's not just insurance. There's money for the mapping. There's money for mitigation. There's money for taking buildings down and returning that to green space." — Karen Horn, Vermont League of Cities and Towns

"It's not just insurance. There's money for the mapping. There's money for mitigation. There's money for taking buildings down and returning that to green space," Horn says. "The program also provides money for planning, and all of those items are important. That's how we're going to figure out what the solution is, on a community-by-community basis, not only in Vermont but everywhere in the country."

Even in the wake of Tropical Storm Harvey, Congress isn’t likely to make major changes to the flood insurance program right away. But with the damage from Harvey expected to drain millions more from the National Flood Insurance Program, Congress will have to get its arms around the issue soon.