But officials expressed some relief after a Senate hearing Thursday that calls to simply kill the program — which is more heavily used in Louisiana than any other state — have mostly died down.
GNO Inc. President Michael Hecht, who testified before the U.S. Senate Committee on Banking, Housing and Urban Affairs said Thursday that for the first time in multiple hearings, he came away believing that lawmakers are ready to fully commit to the program that provides support for homeowners and businesses after floods.
"No senator said that we should do away with flood insurance and privatize the whole thing. That's never happened before," Hecht said after the hearing. "It feels like this is more momentum behind than ever before."
Others testifying at the hearing agreed with Hecht's assessment.
Steve Patterson, mayor of Athens, Ohio, representing the National League of Cities, noted that since 2017, the NFIP's authorization has been extended 28 times, all on a short-term basis.
"This prolonged reliance on short-term measures underscores the pressing need for a more enduring solution," Patterson said. "The complexity of flood insurance issues demands a forward-looking legislative approach that addresses long-term sustainability and the evolving nature of flood risks."
The program is presently set to expire on March 8.
Should Congress fail to act before then, many homeowners seeking a federally backed mortgage would be unable to get one because required flood insurance would become unavailable. Also, the Federal Emergency Management Administration would be unable to borrow money should a disaster strike after NFIP's authorization expires.
For more than a decade, Congress has been kicking around ideas aimed at making the program, which is billions of dollars in arrears, more financially viable. Just what those changes are and how they come about has kept senators and representatives from making the changes demanded by law a decade ago.
The Biggert-Waters Flood Insurance Reform Act of 2012 authorized rate increases "to ensure the fiscal soundness of the program by transitioning the program from subsidized rates, also known as artificially low rates, to offer full actuarial rates reflective of risk."
The amount between what flood insurance collects in premiums and what it pays out is covered by taxpayers. The program is $30 billion in debt and pays about $8 billion in interest annually.
Congress has been debating for years how best to refine the processes so that, as with property or automobile insurance, flood insurance premiums would cover the cost of claims.
FEMA finally hired a private company that recalculated the flood risks of properties all over the country, and set new rates that in some cases are lower but in many cases are dramatically higher. The effort to align risks and rates on flood insurance is called Risk Rating 2.0; FEMA began implementing it in 2022.
Higher rates have led around 3% of the NFIP's roughly 5 million policyholders to cancel. In addition, Hecht said, about 1,400 prospective homeowners were unable to get mortgages because of the insurance issues.
One key issue is that insurance is written for properties that have flooded repeatedly over the years.
Sen. Jon Tester, D-Montana, noted that the NFIP is subsidized by taxpayers, many of whom wonder why they should have to pay for disasters that take place thousands of miles away from where they live. "How do we really get it to a point where it's a sustainable program so we're not so dependent on the U.S. taxpayer for (an individual's) bad decision?" Tester asked.
Hecht said that one possible fix would to exclude policies on properties that repeatedly flood. "You can't build there any longer. There has to be a recognition of being smart about this program going forward," he added.
But having fewer policyholders makes the program less sustainable over the long run, Hecht said.
Sen. Bill Cassidy, R-Baton Rouge, who invited Hecht to testify, said Thursday that Risk Rating 2.0 has put the program in "an actuarial death spiral, where people will be dropping insurance because they can no longer afford it."
Sen. Tim Scott, R-South Carolina, said part of the issue is that property owners living inland have little experience with flooding, unlike his constituents in the port city of Charleston, S.C. On the other hand, residents of coastal areas generally aren't exposed to wildfires.
"We the taxpayers have paid out hundreds of billions of dollars over the last 10 years over catastrophic occurrences," said Scott, adding that the insurance should be expanded to all natural disasters. "It matters where you live as to what the occurrence is, but it is occurring everywhere."
The Louisiana delegation has been asking FEMA to explain what data went into Risk Rating 2.0 and how that information was weighed. For instance, Louisiana's delegation has been pushing for an explanation of whether, and how newly built levees were taken into account.
Sen. John N. Kennedy, R-Madisonville, complained that FEMA has lied about Risk Rating 2.0 and can't be trusted. Last year, he and Cassidy co-sponsored a bill to reauthorize the NFIP for five years and cap annual increases at 9%. The bill has not received a vote.
"They said a million people of the 5 million people will see their rates go down. I haven't talked to a single person who's seen their rates go down," Kennedy said. "This is just an excuse to raise premiums, and they don't care. The whole purpose of the National Flood Insurance Program is to provide a product that people can afford.
"...Right now, FEMA can raise the premiums 18% every single year, and they're going to keep doing it because they don't care. They lied to the American people and my people, and they ought to hide their heads in a bag."
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