June 11, 2019, Bloomberg Environment – Canceling the program’s debt would essentially amount to a $20 billion subsidy of flood claim filers, where “taxpayers who were not affected by instances that caused the event are subsidizing those that were,” said Lisa Miller, an insurance industry lobbyist and consultant in Florida. Miller, a former deputy commissioner of Florida’s Office of Insurance Regulation, told Bloomberg Environment she wishes the legislation would do more to speed the privatization of flood insurance. (Original story location: https://news.bloombergenvironment.com/environment-and-energy/bipartisan-flood-insurance-compromise-gets-lukewarm-reception )
- House committee to mark up compromise that would overhaul National Flood Insurance Program
- Insurance industry, coastal communities, and environmentalists say bill won’t solve program’s long-term problems
The House Financial Services Committee is expected June 11 to approve a bill that would overhaul the financially troubled National Flood Insurance Program, representing the first major revision of the program in more than five years.
The program provides homeowners, renters, and business owners with federally backed flood insurance, a market that private insurers have historically been reluctant to enter due to its volatility. The bill, H.R. 3167, is a bipartisan compromise between the committee’s Democrats and Republicans.
“I don’t usually have many opportunities to work with my Republican colleagues, but flood insurance has long been an issue that defies partisanship,” said Rep. Maxine Waters (D-Calif.), Financial Services’ chairwoman, in a June 5 speech.
But the bill is getting a lukewarm reception from the insurance industry, environmentalists, coastal communities, and even other lawmakers.
The compromise legislation “lacks reforms needed to ensure the program is sustainable and that families won’t be hit with drastic premium increases,” said Sen. Bill Cassidy (R-La.), one of Congress’ most prominent voices on the issue.
What’s In, What’s Out
In addition to allowing the insurance program to operate for another five years, the bill would make policy changes meant to fix the program’s many problems. Years of severe storms and natural disasters have driven it to the brink of insolvency, with claims far outstripping premiums.
The House bill would require the Federal Emergency Management Agency, which runs the program, to update its flood maps using the latest laser-based technology.
It would also allow FEMA to cut off flood mitigation grants to communities if the agency determines these communities aren’t doing enough to deal with frequently flooding properties. The cost of repairing these so-called “repetitive loss” properties accounts for a disproportionate amount of the program’s expenses.
However, the House bill is also notable for what it doesn’t include.
Specifically, it would maintain a cap on the size of flood policies FEMA could issue. The insurance industry has pushed for the removal of this cap, arguing that allowing people to buy larger policies would encourage more homeowners to buy them. An earlier version of this legislation drafted by Waters would have raised this cap to $500,000, but the current bill would keep the cap at $250,000.
Waters also cut a provision from her earlier bill that would have forgiven the more than $20 billion FEMA has “borrowed” from the U.S. Treasury. The insurance program was supposed to cover its own costs through premiums, but hasn’t done so in more than a decade and has had to borrow taxpayer dollars to cover its shortfalls.
Canceling the program’s debt would essentially amount to a $20 billion subsidy of flood claim filers, where “taxpayers who were not affected by instances that caused the event are subsidizing those that were,” said Lisa Miller, an insurance industry lobbyist and consultant in Florida.
Miller, a former deputy commissioner of Florida’s Office of Insurance Regulation, told Bloomberg Environment she wishes the legislation would do more to speed the privatization of flood insurance.
Carol Werner, executive director of the nonprofit Environmental and Energy Study Institute, said the bill doesn’t go far enough to help people leave their flood-prone homes. The legislation would increase the relocation assistance FEMA can give property owners from $30,000 to $60,000.
“I’m still not sure if this is going to help the people that need help the most,” Werner said.
Michael Hecht, head of the Coalition for Sustainable Flood Insurance, also said the bill needs to be stronger on ensuring flood policies don’t become prohibitively expensive. Hecht said he’d like to see Congress lower the cap on how much a homeowner’s premiums can go up in a year, from 15% to 10%.
Updating the flood insurance program “will necessarily be a compromise,” said Hecht, who is also the head of Greater New Orleans Inc., the city’s economic development agency. “But affordability has to be the bedrock of the program.”
Room for Improvement
But Hecht also said he thought the bill was a good jumping-off point that can be modified and amended as it works through the legislative process.
Rep. Steve Scalise (R-La.), the second-ranking Republican in the House, had a similar reaction. His spokeswoman, Lauren Fine, declined to say whether Scalise is supporting the legislation, but said Scalise is “encouraged that at least the House is taking action to begin this process.”
However, this is not the first time the House has tackled the problem of trying to fix flood insurance. Last year, when Republicans controlled the lower chamber, the House passed a flood insurance bill that was mainly crafted by fiscal conservatives, who were worried the program could balloon the federal deficit.
That bill went nowhere in the Senate, where Cassidy and other coastal lawmakers prevented it from even coming up for a hearing.
Last month, Cassidy and seven other senators wrote a letter to the Senate Banking, Housing and Urban Affairs Committee outlining five measures they want to see in a long-term flood insurance bill. The House bill includes some of these measures, but omits the senators’ final request: a cancellation of at least some of the program’s debt.
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