Private Flood Insurance Future Could Be Off the Map

Chris Westfall
Chris Westfall

The recent push to increase private insurance and reinsurance market participation into the National Flood Insurance Program (NFIP) may come down to one question: Who pays for billions in annual flood maps?

Paying for flood mapping will become even a greater priority after President Trump’s proposed budget released Thursday cuts out all discretionary spending for flood map upkeep out of Federal Emergency Management’s (FEMA) budget.

“The NFIP is not just an insurance program, it’s mapping, and floodplain management,” said Sen. Elizabeth Warren (R.-Mass) during a congressional hearing on flood insurance, pointing out that private insurers are currently exempt from “user fees” that fund mapping programs. “Someone has to pay for [funding] mapping and plain management. Over time, letting private plans crowd out federal plans and at the same time as they skip out on the bill could destroy this program.”

Flood maps, and the resulting data, have become a point of contention in recent hearings on the future of the NFIP. House lawmakers questioned whether FEMA was offering enough map and resulting data in order for private market insurers’ to make informed underwriting decisions.

However, efforts to keep up with accurate mapping was dealt blow Thursday when the Trump Administration’s federal budget “blueprint” gutted FEMA’s flood mapping budget.

“The Budget proposes eliminating the discretionary appropriation for the NFIP Flood Hazard Mapping Program, a savings of $190 million, to instead explore other more effective and fair means of funding flood mapping efforts,” the document states, adding that the NFIP would restructure its user fees to “ensure that the cost of Government services is not subsidized by taxpayers who do not directly benefit from those programs.”

The budget proposal does not detail what alternative mapping efforts were to be pursued.

At a meeting of the Senate’s Banking, Housing and Urban Affairs Committee this week, FEMA Deputy Associate Administrator of the Federal Insurance and Mitigation Administration Roy Wright said that the current total mapping budget was $311 million.

That would mean if the current budget proposal were approved, FEMA’s total flood mapping budget would be $121 million going forward, which would be funded entirely by flood insurance “user fees.”

“While Congress appropriates funds for flood mapping, FEMA covers the vast majority of NFIP
costs – including operations, floodplain management, risk mapping, and grants – through
premiums, fees, and surcharges from the 5.1 million policyholders participating in the program,” Wright said in his opening statement.

During his testimony, Wright pointed out that FEMA is obligated by law to review flood maps every five years and that 41 percent of the maps reviewed do not meet the government requirements.

“Clearly the investment in mapping is one that requires resources and we are looking broadly across the budget that require tradeoffs,” Wright told the committee in response to a question. “Yes, these are public goods that should be paid for.”

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