Up until 2004, the NFIP was a seemingly successful program. The number of insured structures was on the raise and the program’s debt was zero or at a low manageable level. By all accounts, the program was running smooth and appeared to be meeting the goals as outlined by the National Flood Insurance Act of 1968 with minor updates from 1968 to 2004.
Enter 2005 and Hurricane Katrina…
Ever since 2005, the program has struggled to maintain its historical performance due to the many disasters, mainly related to significant coastal storms.
And after each of these events, the same basic articles circulate about the struggles of the program and need for major reforms, which is about the only thing anyone can agree on.
Attempts to reform the program have been met with partisan politics and/or public out- cry. This was most recently experienced with the passing of the Biggert-Waters Flood Insurance Reform Act of 2012. Biggert-Waters aimed to bring the NFIP back to its financial glory days by moving insurance premium rates in alignment with true actuarial rates. For some, this meant their policies would increase by $3,000 or more for a total premium of over $5,000 per year. For myself, my $460 policy would have increased to over $800 for my property, which is outside of the 1% Flood Hazard Area. In addition, Biggert-Waters included more funding to expand the programs identification of flood risk and update the technology and mapping of these risks.
Two years later we would see the The Consolidated Appropriations Act of 2014 that would scale back Section 207 of Biggert-Waters involving the rate increases. This meant that the program still had no chance of gaining the needed revenue to sustain itself or pay back the billions of dollars of debt.
Also in 2014, we saw the Homeowner Flood Insurance Affordability Act of 2014. It took additional steps of reversing the impacts from Biggest-Water, including grandfathering rules for most policies.
Now in 2017, we find ourselves in the same place with another record breaking flood (Hurricane Harvey) with its estimated $100+ billion and several other 2017 disasters that continue to plaque the program. The NFIP now expires in December and the same tools, with a few new ones, have been laid out on the table. With talks of wiping the current debt clean, it will be all for nothing without a major overhaul of the program. Whether you believe in climate change or not, these storm events are not going to stop and if we do not make changes we are only one storm away from being back in debt.
We preach to our children to learn from their mistakes, but in the adult word, especially in the world of government, we continue to struggle with the simple lesson…