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Reducing America's flood risk

Four ways to help shore up the federal national insurance program.

Albert Silberman visits his home in Lindenhurst almost

Albert Silberman visits his home in Lindenhurst almost two months after it was destroyed by Hurricane Sandy, on Dec. 19 2012. Photo Credit: Johnny Milano

Flooding is the most common and costly type of disaster in the United States. In fact, for the 2017 and 2018 hurricane seasons, the National Flood Insurance Program paid policyholders more than $11 billion to assist in recovery efforts. That amount still doesn’t touch the thousands of others with flood losses who weren’t insured.

I know that there are ways to improve the NFIP. Hurricanes Katrina, Sandy, Harvey, Irma and Maria rocked the financial foundation of the program. Flood claims from those storms far exceeded the funds available from policyholder premiums to pay for insured losses. It is unrealistic to raise premiums enough to make up the deficit from extreme events.

As a result, Congress enabled the NFIP to borrow from the U.S. Treasury to pay claims, thereby assisting property owners and communities to recover quicker.

Let me be clear: borrowing is a temporary measure put in place while NFIP works on ways to improve its financial framework and other critical reforms continue. Here are some of our initiatives:

  • In 2017, FEMA took advantage of a Congressional provision allowing the program to secure reinsurance from the private markets to help reduce the amount of the NFIP’s financial losses. Reinsurance is a financial risk-management tool used by private insurance companies and public entities to protect themselves from large financial losses. The program recovered $1.042 billion from this coverage as a result of the losses from hurricanes Harvey, Irma and Maria.
  • FEMA completed an additional reinsurance placement in August 2018 transferring $500 million in NFIP flood risk to investors in capital markets.
  • The NFIP oversees flood-plain management and building code guidance for 22,352 communities nationwide. Participating communities ensure all new construction meets federal building standards to reduce future damage from flooding. This practice saves almost $2 billion a year in avoided losses.
  • FEMA will launch an initiative to deliver fairer rates for the NFIP by leveraging technology and data to streamline the underwriting and policy-issuance process.

Catastrophic events like the ones mentioned earlier will occur. That’s why we are working to increase the number of policyholders.

Unfortunately, most Americans are in denial about their flood risk and lack needed insurance protection. Where it can rain, it can flood. Many only find that out when disaster strikes and they struggle to rebuild.

We know that without the NFIP and community involvement —managing floodplains, updating flood maps and communicating flood risk — millions of Americans would be at a much higher risk of losing the life they’ve built to floodwaters.

We know that residential flood insurance — the bulk of which is provided by the NFIP — is the best protection against a major threat to lives and homes.

David I. Maurstad serves as the Federal Emergency Management Agency's deputy associate administrator for insurance and mitigation and is the chief executive of the National Flood Insurance Program.

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