WASHINGTON—The House Financial Services Committee debated a package of legislation Wednesday to reform and reauthorize the National Flood Insurance Program, a program that both Republicans and Democrats agree needs substantial changes.
At the hearing, the committee released a package of discussion drafts that, together, would extend the program until 2024, provide discounted premium rates for people with lower incomes, expand flood mapping and cancel the program’s debt of more than $20 billion.
Congress has failed to reach an agreement to reform the program for several years, and has had to reauthorize the program ten times since the end of the 2017 fiscal year. The risk of a lapse has threatened to stall home closings and policy renewals.
"This haphazard approach to legislating puts communities at risk and undermines the health of our housing market," said Rep. Maxine Waters, D-Calif., chairwoman of the committee. "I intend to work in a bipartisan manner" with the committee’s ranking member, Rep. Patrick McHenry, R-N.C., "to provide a long-term reauthorization to restore stability and confidence in the market."
If passed, the legislation would take effect on May 31 — the same day the program is set to expire again.
The NFIP provides flood insurance to 5 million property owners, renters and businesses. Those looking to buy property in certain flood areas designated by the Federal Emergency Management Agency are required to purchase flood insurance in order to qualify for a mortgage. Private flood insurance is often pricey, and is sometimes not available in certain locations that are especially prone to flooding.
Lawmakers on both sides of the aisle have expressed concern about the program’s insolvency, outdated maps that often incorrectly labeled flood zones and the frequent denial of claims.
“The reality of climate change is hitting home and changes to NFIP are necessary to ensure communities can thrive in the future,” said Rep. Frank Pallone, D-N.J., who testified on a panel of lawmakers at Wednesday’s hearing.
But some congressmen expressed concern that the committee’s legislation doesn’t go far enough to address the program’s inherent problems.
“As the committee with oversight of the NFIP, reauthorizing this program with taxpayers still on the hook is bad policy and shortsighted,” said Rep. Blaine Luetkemeyer, R-Mo. “Simply forgiving the debt NFIP holds is equally irresponsible and does not solve the root causes of the NFIP’s insolvency.”
Without resolving the program’s insolvency, debt is likely to return, said Raymond Lehmann, the director of finance, insurance and trade policy at the R Street Institute, on a second panel at Wednesday’s hearing.
“You’ll forgive this debt today, but it’ll come back,” he said. “There’s no question about that.”
Others also noted the lack of competition in flood-prone areas between the government and private insurance companies, some of which might decline to offer flood insurance in an area that has experienced frequent flooding.
“We cannot let policies be cherry-picked and leave the government saddled with only flood-prone properties,” said Rep. Bill Pascrell, D-N.J., who also testified on the lawmaker panel. “We must ensure protections are in place to prevent claims from being denied on technicalities.”
The package of legislation included a bill previously introduced by Rep. Nydia Velazquez, D-N.Y., that would reform the NFIP’s “Write Your Own” program, which allows participating insurers to issue NFIP flood insurance policies and is the origin of most of today’s active policies.
The reforms could address an issue that Pascrell’s state of New Jersey experienced after Hurricane Sandy in 2012, he said.
“Write Your Own companies that intentionally underpaid policyholder claims were particularly egregious,” he said. “Currently there is a perverse incentive to underpay claims, which they did to no one’s surprise.”
However, others expressed support for the program. Rep. Ted Budd, R-N.C., said he would oppose policies that harm the Write Your Own program, arguing that the committee should instead strengthen the government’s participation with participating companies.
That view was shared by Christopher Heidrick, who testified on behalf of the Independent Insurance Agents and Brokers of America, on the second panel.
“The Write Your Own companies do a lot more training and they have an incentive to see their book of business grow to have more customers insured,” Heidrick said.