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‘This program is sick.' Fight brews over flood insurance

Efforts in Congress to overhaul an embattled insurance program that covers millions of properties against flood damage were jolted yesterday by a plan to make taxpayers pay $20 billion in cost overruns.

The proposal by Rep. Maxine Waters (D-Calif.), chairwoman of the Financial Services Committee, was instantly attacked by Republicans, setting up tense negotiations over renewing the program as chronic flooding is exacerbated by climate change.

Despite unanimous agreement that the National Flood Insurance Program needs revision, the problems and potential solutions are so varied that Congress has failed for more than four years to help it avoid financial losses and steer development out of flood-prone areas. Although the program primarily insures against floods, it also reduces damage to property through mitigation programs and flood mapping.

"This program is sick," Rep. Sean Duffy (R-Wis.) said at a hearing yesterday by the Financial Services Committee. Duffy's 2017 reform bill, which sought to encourage more private insurers to write flood policies, passed the House but stalled in the Senate.

Waters is taking a different approach that stresses containing insurance rates, strengthening flood mitigation and improving FEMA's ongoing work at drawing new maps that define the nation's flood zones. And Waters wants to start by forgiving the $20.5 billion debt the insurance program began accumulating when massive hurricanes forced it to pay unprecedented claims, beginning with Katrina in 2005.

"We must do more to address unaffordable premium costs for low-income households [and] address the program's debt, which is unfairly burdening policyholders with millions of dollars in interest," Waters said yesterday. The program has paid $4.2 billion in interest on its debt to the Treasury Department since 2005, according to the Federal Emergency Management Agency, which runs NFIP. The program was self-sustaining until 2005.

Debt forgiveness promises to be controversial because Congress and the White House canceled $16 billion of the insurance program's debt in October 2017 after Hurricanes Harvey, Irma and Maria caused billions of dollars of flood damage in Texas, Puerto Rico and the U.S. Virgin Islands. Rep. Blaine Luetkemeyer (R-Mo.) said that writing off the debt is "bad policy and shortsighted" because it "does not solve the root causes of insolvency."

The ranking Republican on the Financial Services Committee, Patrick McHenry of North Carolina, criticized Waters' proposal for forgiving "$20 billion without any assurance or necessary reforms that give us some understanding that it wouldn't just pile up again."

But another Republican, Rep. Garret Graves, who represents a flood-prone district in southern Louisiana, noted that Congress allocated $120 billion in disaster aid to help victims of the 2017 hurricanes, many of whom did not have flood insurance. "We can't just look at the balance of the debt," said Graves, the ranking member of the Select Committee on the Climate Crisis (Climatewire, March 11).

The insurance program covers 5.1 million properties and is the nation's primary flood insurer. Homeowners' insurance policies generally do not cover flood damage.

One of Waters' boldest proposals would take a step toward providing premium discounts to low-income policyholders, who are heavily concentrated in some high-risk flood zones. Many policyholders receive federal subsidies if they live in homes built before 1975 or in homes that were recently declared to be in a high-risk flood zone.

Waters' proposal would for the first time establish subsidies based on a policyholders' income. That received support from the conservative R Street Institute, which advocates for free markets.

R.J. Lehmann, the institute's director of insurance, praised Waters and said her idea is "the first substantial policy proposal" to address the affordability of federal flood insurance. Policies cost an average of $699 a year, according to FEMA, but vary widely, particularly in high-risk areas in which many low-income individuals and families live.

Current subsidies "disproportionately benefit wealthier areas," Lehmann said. Subsidizing low-income policyholders — those making less than 80 percent of an area's median household income — is "crucial" to phasing out other subsidies, Lehmann said.

Waters proposed providing subsidies to low-income policyholders for five years to test whether they induce more property owners to buy flood insurance.

Waters also would modernize how FEMA draws new flood zones by requiring the agency to use the most advanced technology and to produce heavily detailed maps.

Flood-mapping expert Velma Smith of the Pew Charitable Trusts research organization testified yesterday that spending on new maps "has been far from adequate" and that many rural areas "lack even the most basic information about [flood] risks." That could lead communities to allow construction unwittingly in high-risk flood zones, Smith said.

The insurance program's legal authority expires on May 31, 2019. The deadline will force Congress to enact reform by then or to simply pass a one-page bill extending the program for a period of months without making any changes. Congress has passed such reauthorizations 10 times since the end of 2017.