Harvey Brings New Urgency To Flood Insurance Reform

Congress appears eager to approve federal aid for the victims of Hurricane Harvey, but it could have a tougher time as it races an end-of-September deadline to renew the National Flood Insurance Program, which is already $25 billion in debt thanks to past storms.

The program has long been a federal backstop for areas prone to flooding, providing coverage to homeowners when insurance companies won't.

But pressure to keep premiums artificially low, compared to actual risks, has left the program struggling and in the red, and conservatives have demanded serious reforms to protect taxpayers before Congress renews the program next month.

"I just don't think a short-term reauthorization bill gets the job done," House Financial Services Committee Chairman Jeb Hensarling, Texas Republican, told Bloomberg. "We need to make sure we don't compound a physical tragedy today with a fiscal tragedy tomorrow."

Democrats say reforms are worthwhile, but that the last thing lawmakers should do is risk a lapse in coverage with the devastation of Harvey still be felt.

"While the NFIP is in desperate need of improvements — from protecting homeowners from outrageous premiums and storm victims from fraud and abuse — the program cannot be allowed to lapse, because then tens of thousands of New Yorkers and millions of Americans would be in jeopardy," said Senate Democratic leader Charles E. Schumer of New York.

A spokeswoman for GOP House Speaker Paul D. Ryan said that while details are still being worked through, "the flood insurance program will be reauthorized."

If the program lapses, existing policies wouldn't immediately expire, but homeownership in areas that requires people to carry flood insurance could dip as fewer people get coverage.

Massive storms have left the flood program in its current troubles. The 2005 storm season, with Hurricane Katrina, cost the government nearly $18 billion in losses, while Hurricane Sandy in 2012 cost nearly $10 billion.

With total debt now at $24.6 billion, the program is nearing its overall borrowing limit of $30.4 billion.

"The National Flood Insurance Program obviously is not collecting enough in the way of premiums to cover its actual expenses in terms of claims," Robert Hartwig, co-director of the University of South Carolina's Center for Risk and Uncertainty Management, said on C-SPAN Wednesday.

"In the world of insurance, just being close enough or having nearly enough money to pay your claims is not sufficient."

Steve Ellis, vice president of Taxpayers for Common Sense, said it would be insulting if lawmakers don't try to reform the program before it expires. He said there should be an extension of no more than six months to give them some time to figure out lessons from Harvey and get the reforms through.

"Just kicking the can down the road and doing a clean reauthorization for five or six years is ridiculous," he said. "[It's] a disservice to taxpayers. It's actually an insult to taxpayers."

Congress extended the program for five years in 2012, after there had been several lapses between 2008 and 2012.

There are about 250,000 policyholders in Harris County, Texas, where Houston is, reflecting more than $70 billion in flood coverage. Mr. Ellis said claims of even 15 percent of insured value from Harvey would total a $10.5 billion loss for the flood insurance program.

"It's going to have to be an evolutionary reform," he said.

The Associated Press reported Wednesday that the 250,000 figure is actually down from almost 275,000 a few years ago. Texas hasn't had major flooding since Tropical Storm Allison in 2001, and it's possible that residents figured the chance of massive flood damage was too remote to make the insurance premium payments worthwhile, according to AP.

FEMA administrator Brock Long said he wasn't sure what was behind the decline, but that people without flood insurance could still seek help from the Small Business Administration for disaster relief from Harvey.