The clock is ticking on flood insurance


The federal National Flood Insurance Program (NFIP) wil expire on September 30, 2020 and while policymakers continue struggling with the Coronavirus pandemic, they should not ignore the looming national problem involving flood control. Our nation faces a growing risk of flooding due to hurricanes, higher river flow, high tides and urban storm water runoff.

There are many ways to reduce this flooding risk including raising buildings above the height of floods, waterproofing structures, building levees or floodways, and retreating from the flood zone.

Another risk reduction method is to buy flood insurance. Unfortunately, for those who live in a flood zone, finding private flood insurance is a challenge. Decades ago, many private insurers left the flood insurance market as they were significantly impacted with catastrophic flood payouts. For those communities located in a flood zone, the federal government stepped in with the National Flood Insurance Program in 1968 and the nation has subsidized flood insurance ever since.

Hurricane Katrina and Super Storm Sandy have left the NFIP billions in debt from huge flood insurance payouts because NFIP’s premiums are kept low by Congress so residents can afford them. Unfortunately, these premiums do not match the risk levels for flooding.

Here is the challenge: Many who do not live in or near flood plains have been asking their Congressional representatives to address the risk to premium mismatch as they feel they should not subsidize those living in risky areas. Congress has for decades struggled for a balanced approach. Many want to close the program, others prefer charging higher premiums, and others want heavy subsidies.

I recently talked with a few friends who live in flood plains and asked their thoughts. One, who has a house on the Chesapeake Bay and is paying for flood insurance, is quite distraught. The value of his home is tied to having flood insurance. If Congress decides to close the program and there is no flood insurance, he asked who would buy his house at full value knowing it could all be gone in a flood. A Louisiana friend who owns commercial real estate told me he thinks federally subsidized flood insurance is a wonderful idea or he would have to pay full price. My third friend said he hates the idea of having to buy flood insurance because it costs so much and he has never flooded.

NFIP reauthorization is an opportunity for Congress to take bold steps to reduce the program’s complexity and strengthen its financial framework. Should the NFIP’s authorization lapse, FEMA, which manages the program, would stop selling and renewing policies for millions of properties nationwide. Overall, the National Association of Realtors estimates that a lapse might impact approximately 40,000 home sale closings per month.

So as Congress continues to wrestle with the NFIP reauthorization question, the question looms: Which of my friends is right?

Maj. Gen. (ret) Michael Walsh

Senior Advisor

A member of the Dawson team since 2019, Michael Walsh served as Deputy Commanding General for Civil and Emergency Operations and commander of three divisions in the U.S. Army Corps of Engineers.

The views expressed here are those of the author and do not necessarily reflect the views of Dawson & Associates.

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