House Financial Services Subcommittee Issues Testimony From Association of State Floodplain Managers
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The ASFPM and its 38 state chapters represent more than 20,000 local and state officials as well as private sector and other professionals engaged in all aspects of floodplain management and flood hazard mitigation, including management of local floodplain ordinances, flood risk mapping, engineering, planning, community development, hydrology, forecasting, emergency response, water resources development and flood insurance. All ASFPM members are concerned with reducing our nation's flood-related losses. For more information on the association, our website is: www.floods.org.
Floods are this nation's most frequent and costly natural disasters and the trends are worsening. The National Flood Insurance Program (NFIP) is the nation's most widely used tool to reduce flood risk through an innovative and unique mix of incentives, requirements, codes, hazard mitigation, mapping and insurance. It is a partnership between communities, states and the federal government. The NFIP is the one tool in the toolbox that serves policyholders, taxpayers and the public well. Our testimony is intended to provide a better description of these interdependencies as well as 20 recommendations for
The NFIP is a National Comprehensive Flood Risk Reduction Program
The NFIP was created by statute in 1968 to accomplish several objectives. Among other things, the NFIP was created to:
* Provide for the expeditious identification of and dissemination of information concerning flood-prone areas through flood mapping
* Provide communities the opportunity to voluntarily participate in the National Flood Insurance Program in order for their citizens to buy flood insurance and, as a condition of future federal financial assistance, to adopt adequate floodplain ordinances consistent with federal flood loss reduction standards
* Require the purchase of flood insurance in special flood hazard areas by property owners who are being assisted by federal programs or by federally supervised, regulated or insured lenders or agencies.
* Encourage state and local governments to make appropriate land use adjustments to constrict the development of land exposed to flood damage so homes and businesses are safer and to minimize damage caused by flood losses
* Guide the development of proposed future construction, where practicable, away from locations threatened by flood hazards
* Authorize a nationwide flood insurance program through the cooperative efforts of the federal government and private insurance industry
* Provide flexibility in the program so flood insurance may be based on workable methods of distributing burdens equitably among those protected by flood insurance and the general public who benefit from lower disaster costs
Beyond merely providing flood insurance, the NFIP is unique as it integrates multiple approaches for identification of flood risk, communication of risk, and techniques to reduce flood losses. It is a unique collaborative partnership enlisting participation at the state and local level. It is a multi-faceted, multiple objective program - a four-legged stool as it is often called. The four legs of the stool are (1) floodplain mapping, (2) floodplain management standards, (3) flood hazard mitigation and (4) flood insurance. Altering one leg without careful consideration of impacts on the other three legs can have serious repercussions on reducing flood losses. The NFIP on the whole provides substantial public benefits as our testimony will further detail.
We must remember that 90% of natural disasters in
A Pivotal Time for the NFIP - and a Window of Opportunity
Today, the NFIP is engaged in one of its most transformational actions in the past several decades -- the implementation of Risk Rating 2.0. At its core, Risk Rating 2.0 is consistent with a reform that ASFPM and many other organizations have been calling for, which is to ensure that, through accurate insurance rating, we can communicate the relative level of flood risk to property owners and renters. While this is a simplified view and implementing a transformation like Risk Rating 2.0 is much more complicated, it is also an opportunity to implement several complimentary reforms. For example, a seemingly widely supported reform from the last
ASFPM is aware that the roll-out of any transformational change will require adjustments as it is implemented. Our primary concerns with Risk Rating 2.0 are focused on making sure that changes to the insurance part of the NFIP have not broken integral ties with either the floodplain management or mitigation elements of the program. For example, a reason that some communities may have chosen to adopt a protection standard for buildings (a freeboard) was for insurance premium reductions. However, under Risk Rating 2.0, the benefits of elevating a structure for premium reduction are not understood and seem to be less than under the previous rating model which could impact a community's willingness to adopt standards that go beyond the NFIP minimums. Under Risk Rating 2.0 individual property level mitigation actions for existing at-risk buildings such as installing flood vents do not seem to be nearly as well as incentivized as under the previous model and are concerned that Risk Rating 2.0, despite its important benefits, appears to provide insufficient recognition of mitigation actions to result in premium credit. The point is that we must strive to ensure that there is much better transparency and awareness of how the new, multiple variables affect flood insurance premiums. ASFPM is pleased to begin working with
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1 FEMA Community Status Book accessed
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Today's NFIP must ensure that the nation is ready to address tomorrow's flood risk. Floodplain managers know development often results in increased flood heights, and we are observing changing weather patterns that result in shifting snowmelt/rainfall in the West, and nationally, more intense short duration storms are causing more flash floods. Additionally, unrelenting sea level rise (SLR) is beginning to affect communities from
More recently, issues of equity and social vulnerability have been recognized as needing to be addressed.
So, what will the NFIP of tomorrow look like? If we make the necessary adjustments and investments, the NFIP of tomorrow will be robust and fiscally-strong, with the ability to be resilient in the face of a changing climate. The program's floodplain management standards will be improved to reflect our nation's increasing flood risk and we will have a set of flood mapping data everywhere so that land use managers, businesses and homeowners can make informed decisions on flood risk. Aggressive mitigation functions will enable repetitive loss properties and other high-risk buildings to be mitigated quickly and individual mitigation actions will be incentivized through premium reductions. And gone will be the days when new property buyers are not aware of the flood risk or history of the property they are purchasing. The key question today is are we up to the task to make this vision a reality?
A Long-term Sustainable Financial Framework is Needed; Debt is an Issue
Until 2005, the NFIP had generally been self-supporting. In the 1980s, the program went into debt a few times and ultimately
The NFIP was never designed to pay for catastrophic events. In fact, from 1968 to 1978 the concept was one of risk sharing with the private sector, with direction from
So what is next? ASFPM believes that
* ASFPM recommends forgiving the remainder of the current debt and adopting some form of a "sufficiency standard" as an automatic, long-term mechanism within the NFIP that ensures, after a certain threshold of flooding, the debt will be paid by the
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2 The latest CRS report on the Federal Crop Insurance Program looked at the average net payments for 10 years from FY2010 through FY 2020. https://crsreports.congress.gov/product/pdf/R/R46686
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Among other things, the sufficiency standard would consider the reserve fund balance, utilization of reinsurance, and ability of the policy base at that time to repay.
* At a minimum, the requirement for the NFIP to pay interest on the debt should be discontinued, or the interest and debt payments should be directed as reinvestments back into the program for needs such as flood mapping or mitigating flood-prone buildings, especially repeatedly flooded buildings.
ASFPM is worried that as we head into a more inflationary environment which would likely have the effect of increasing interest rates, servicing the debt will quickly become the largest financial risk to the NFIP. The fact is, today's NFIP has taken advantage of the numerous tools
Floodplain Mapping
Floodplain mapping is the foundation of all flood risk reduction efforts, including design and location of transportation and other infrastructure essential to support businesses and the nation's economy. The flood maps are also used for emergency warning and evacuation, community planning, siting and locating of critical facilities like hospitals and emergency shelters. Today
Today, flood risk maps only exist for about 1/3 of the nation - only 1.2 million of 3.5 million miles of streams, rivers, and coastlines have been mapped. Also, even some of today's maps are many decades old, or were updated before the current standards to redraw boundaries based on more accurate study data and topography. ASFPM has repeatedly expressed concern that there is still a large inventory of pure "paper" maps that have never been digitized and modernized with newer flood study procedures. Many other areas have never been mapped at all, so there is no identification of areas at risk and communities have no maps or data to guide development to be safe from flooding. This is a significant problem and the example below illustrates why.
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3 Most insurance systems have some trigger for socializing risk of extreme events, such as a sufficiency standard based on a pre-identified event (i.e., a one-in-twenty-five year or one-in-one-hundred-year event) beyond which mechanisms like guaranty funds pay losses. Adopting an explicit standard of this type for the NFIP would provide clarity as to what its funding sources should be and give
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(Above: Aerial view of
On the
(Above: Portion of
Luckily,
For most of the history of the NFIP, flood mapping was done to primarily support two functions of the NFIP: flood insurance rating and floodplain management standards. As a result, two pieces of data were typically produced: the 100-year and the 500-year flood. However, as the NFIP grew and as flood risk management became more important, the nation's citizens looked to the
In 2012,
1. All populated areas and areas of possible population growth located within the 100-year and 500-year floodplains;
2. Areas of residual risk, including areas that are protected by levees, dams, and other flood control structures and the level of protection provided by those structures;
3. Ensuring that current, accurate ground elevation data is used;
4. Inclusion of future conditions risk assessment and modeling incorporating the best available climate science; and
5. Including any other relevant data from
Unfortunately, ASFPM is not aware of any single flood map in the entire country that exists today where all of these data sets exist on either a FIRM panel or in the accompanying data
What is the gap then? ASFPM believes that the gap lies in getting the job of initially mapping the nation done.
Consider:
* Based on the National Hydrography Dataset (NHD) and
* Over 3,300, or roughly 15%, of NFIP communities have maps over 15 years old, with many of these over 30 years old and still having "
* Many of the added mapping requirements from 2012 haven't even been started beyond preliminary studies and research. This includes residual risk mapping around flood control structures and future conditions mapping. A 2016 TMAC report reviewing the National Flood Mapping Program stated: "To create technically credible flood hazard data,
* In 2020, in a
ASFPM believes this gap in data is contributing significantly to the increasing flood losses in the nation. A 2018 study shows that the total US population exposed to serious flooding is 2.6-3.1 times higher than previous estimates, and that nearly 41 million Americans live within the 100-year floodplain (compared to only 13 million when calculated using
In 2020, ASFPM completed the update to its 2013 report Flood Mapping for the Nation, which modeled the costs to fully implement the National Flood Mapping Program under the 2012 Biggert-Waters Reform Act and complete the initial flood mapping of the nation. We conclude that it will cost between
To improve flood mapping in the nation:
* ASFPM recommends the reauthorization, funding, and enhancement of the National Flood Mapping Program (NFMP).
* ASPFM supports an increased authorization for the National Flood Mapping Program to between
*
* ASFPM urges consideration of an immediate surge of flood map funding investment to jump-start the completion of mapping the nation and associated new mapping tasks to provide critical information to guide the newly enacted significant investment in the nation's infrastructure.
ASFPM notes that in 2016, a letter initiated by then Chairwoman Ranking Member
Floodplain Management (Floodplain Regulations, Training, Public Education)
To participate in the NFIP, states and communities must abide by minimum development standards and designate a NFIP coordinator. At the state level, this means that there is a NFIP coordination office that provides technical assistance and training to communities and the public, serves as a repository for the state's flood maps, ensures the state has sufficient enabling authority for communities to participate in the NFIP and is the lead agency to ensure that state development is consistent with NFIP minimum standards. At the local level this means that over 22,500 communities participate in the NFIP and have adopted minimum development and construction standards to reduce flood losses. As floodplain areas are identified and mapped throughout the nation, NFIP participating communities must adopt and enforce local floodplain management standards that apply to all development in such areas. We are pleased to note that, in response to a petition filed by ASFPM and the
NFIP standards are the most widely adopted development/construction standards in the nation as compared to building codes, subdivision standards, or zoning.
Why do communities participate in the NFIP and adopt local standards? State floodplain managers around the nation who have enrolled nearly all of the communities in the past 40 years know a major reason is to make flood insurance available to their citizens. If a community hasn't joined (there are still about 2,000 communities not in the NFIP), it is usually compelled to do so when a resident gets a federally-backed mortgage and needs to have flood insurance. While there are some non-participation disincentives in terms of restrictions on some forms of disaster assistance, such disincentives are weak and very limited. For most communities, they are not much of a disincentive at all, but getting flood insurance is a strong incentive. We must ensure changes to the insurance element of the NFIP do not undermine this incentive.
To enable the NFIP to provide better technical assistance to the 22,500 communities in the NFIP, the
* ASFPM recommends that a community assistance program which would provide resources to states be explicitly authorized with funding double its historic level to maintain and expand community technical assistance through effective state floodplain management programs.
Additionally, the technical assistance provided through a robust, authorized CAP program is an excellent, proven framework to address equity and social justice issues as states with a comprehensive state floodplain management program can assist far more communities that are disadvantaged or have low capacity than can any program providing direct federal assistance. There are simply too many communities needing assistance for a direct federal model to be successful.
Although millions of American's homes are at risk of flooding, 21 states have no real estate disclosure laws. This makes it difficult for a home buyer to learn of a property's flood history. These states do not require sellers to tell prospective home buyers or renters whether a property has been damaged by a flood and limiting access to such information prevents people from making smart decisions about where to live. Unfortunately, many homeowners learn of their propensity to flood only after suffering through multiple disasters. The other 29 states have varying degrees of disclosure requirements. This hodgepodge of state and local policies hinders buyers from making fully informed decisions, and has a disproportionate impact on those that do not have the economic resources or options to make more informed decisions (another equity concern).
Additionally, there is no way for a prospective home buyer or realtor to determine if
* ASFPM supports a national real estate disclosure requirement for a property's flood history. Such a requirement could be tied to a state's participation in the NFIP.
* ASFPM supports providing prospective buyers, renters, property owners, and lessees full access to NFIP flood claims and disaster assistance data (IA and PA if applicable) thereby providing knowledge of flood claims and damage data to support effective decision making, risk awareness and management, and, where appropriate, mitigation or ultimate removal of buildings from high risk areas.
* ASFPM supports timely access to historical coverage and claims loss data, including all repetitive flood loss data for communities and states.
For more than three years, ASFPM has been engaging
* ASFPM recognizes that there are Privacy Act issues associated with the release of certain data and information; however, it is critical that such issues must be resolved and overcome if we are to make progress on flood risk reduction in the nation. One approach may for
In 2018, the
Flood Hazard Mitigation
The NFIP has two built-in flood mitigation programs: Increased Cost of Compliance (ICC) and Flood Mitigation Assistance (FMA). These NFIP funded mitigation programs have resulted in more than
ICC is the fastest way to get flood mitigation done and is paid for 100% through a separate policy surcharge. Since it is simply part of the flood policy it isn't run like a typical grant, funds are available to the owner much quicker. It is a transaction between the insured and insurance company. 60% of ICC claims are used to elevate a building and 31% of the time ICC is used to demolish a building. Other techniques used are floodproofing or relocation of the building out of the floodplain altogether. From 1997 to 2014, ICC has been used to mitigate over 30,000 properties.
ASFPM has been frustrated for several years over the pace of
* A building being substantially damaged,
* A building classified as a repetitive loss,
* A building where another offer of mitigation is being made,
* And the Administrator's discretion to offer ICC when it is in the best interest of the flood insurance fund.
Of these four, only one trigger is being utilized: when a structure has been determined to be substantially damaged. While
Another frustration with how ICC is currently being implemented is the determination of how the ICC premium surcharge is set by
In its 2010 rate review, however,
ASFPM believes ICC needs two other adjustments by
* ASFPM recommends the ICC claim limit be in addition to the maximum claim limit under a standard flood insurance policy and that ICC can be triggered by any hazard event, not just flooding.
* ASFPM recommends the "base" ICC claim limit be raised to at least
* ASFPM recommends that
* ASFPM recommends
FMA operates like a typical grant program where a community applies through the state with a grant application. Further, FMA also funds other types of mitigation that can address issues on the neighborhood- or community-scale such as stormwater management systems to reduce flood risk and flood mitigation plans. In recent years, the priority for the FMA program has been repetitive loss and severe repetitive loss properties. While this is an important objective, ASFPM worries that an exclusive focus on such projects is increasingly resulting in a gap where no assistance is available for properties that desperately need assistance, such as older pre-FIRM, non-repetitive loss structures for which insurance rates may be increasing significantly. ASFPM recommends that accommodations be made for these types of properties as well, when
Repetitive loss claims unnecessarily drain the
Another idea for expanding mitigation that has merit is flood mitigation loan programs. After Superstorm Sandy, ASFPM worked with HUD to clarify that their
ASFPM supports improvements to
* To address
Flood insurance is the easiest way for a property owner to manage their flood risk. It was also viewed by the original authors of the program as a way to more equitably share risks and costs of development decisions. Yet too few property owners and renters carry flood insurance. Today it is estimated 10% of the population lives in an identified floodplain and that number is projected to grow to 15% by the year 2100 based on natural population growth and future conditions (land use, development, and climate change). While the NFIP provides some standards to reduce flood losses to new development, it has not encouraged or helped communities avoid development in high flood risk areas. It is also estimated the number of policies increasing by 100% and the average loss per policy increasing by 90% in 2100. 4 The point is that these trends show growth in the human occupation of flood hazard areas and the potential damage that may result. As we have pointed out earlier, there are many more miles of rivers, streams and coastlines that aren't even yet mapped (which is why it is not surprising that 25% of NFIP claims and 1/3 of federal disaster assistance come from outside of mapped floodplains)
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4 The Impact of Climate Change and Population Growth on the National Flood Insurance Program through 2100. 2013.
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5.
Flood Insurance Affordability
The aforementioned 2020 NAC report describes how the NFIP "inadvertently assists the wealthier segment of the population by serving only those who can afford flood insurance." Although reforms in 2012 and 2014 did put all properties on the path to full risk rating, it also affected flood insurance affordability. Unfortunately, a long-term solution to affordability was not included in either BW-12 or HFIAA. However, through Risk Rating 2.0,
Over the past several years, the need for a means-tested program to provide premium subsidies to address affordability concerns has gained traction. ASFPM is very supportive of the concept. We point out that such a program must include two provisions: 1) that the subsidy is shown separate from the premium so that the policyholder better understands the underlying flood risk, and 2) that the subsidy be paid for outside of the NFIP and therefore by taxpayers versus NFIP policyholders as the benefits accrue to society at large versus other NFIP policy holders. It seems appropriate that such a program would be inclusive of an equity standard that has been proposed by
* ASFPM supports a needs based, equitable flood insurance premium assistance program. However, the subsidy should remain separate from the premium in order to properly communicate flood risk and it should be paid for outside of the NFIP as the benefits of the program are to society at large.
In 2014, to meet House PAYGO rules, there was a large surcharge imposed on non-primary residences, small businesses and other non-residential structures. The surcharge is neither risk-based nor need-based. Premium increases and surcharges have led to a notable reduction in policies in force, declining from a high of 5.5 million to about 5.1 million today.
* ASFPM recommends the elimination of the PAYGO surcharge established in 2014 to improve flood insurance affordability and equity with private flood policies. This will take an additional cost burden off of small businesses.
A third reform that is presently being debated is the cap on flood insurance premium increases. ASFPM does not have a specific recommendation on a suggested rate cap; rather, we would remind the committee that generally rate caps that are too aggressive (too high) reduce the glide path to actuarial risk rating and therefore could exacerbate the problem of flood insurance affordability, while rate caps that are lower could help with flood insurance affordability and give owners time to consider and implement rate reducing flood mitigation options.
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5 FloodSmart Flood Facts. Webpage accessed 3/14/17.
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The Private Flood Insurance Market
Since 2012, previous NFIP reforms have led to a robust private market for flood insurance. Reforms to stimulate more private market participation have worked as intended. ASFPM very much believes a strong NFIP can co-exist with the private market offering flood insurance as long as both are on equal playing fields. In other words, neither the NFIP nor the private market should be at a competitive disadvantage. The result can be coverages that complement each other. For example, private insurers depend on NFIP maps and agree local floodplain regulations help all insurance by reducing risk, yet private policies do not have to include the Federal Policy Fee to help pay a share of the flood mapping and floodplain management costs. The wholly unfair PAYGO surcharge has allowed private policies to be written using
In 2019, the mortgage regulators issued a final rule which directly conflicts with statute when it comes to what type of flood insurance policy qualifies to meet the mandatory purchase requirement. While rulemaking had gone on for some years, the "discretionary acceptance" approach appeared in the latest, final version with no opportunity to comment. The primary issue is that
* ASFPM recommends
The private insurance industry uses
* ASFPM recommends an equivalency fee, equal to the Federal Policy Fee, be assessed on all private flood insurance policies sold to meet the mandatory purchase requirement.
As private flood insurance becomes more widely and easily available, provisions must be made to ensure such policies can only be made available to meet the mandatory purchase requirement if the community participates in the NFIP. Why? For thousands of communities in the NFIP, the primary reason for joining the program is the availability of flood insurance to meet the mandatory purchase requirement. As a requirement of joining, communities agree to adopt and enforce local floodplain management standards. As a result, floodplain management standards are the most widely adopted in
* ASFPM recommends that when private flood insurance policies are sold to meet the mandatory purchase requirement, they can only be sold for that purpose within NFIP participating communities.
Finally, ASFPM is concerned about the availability of private claims and policy data for the purposes of floodplain management and flood mitigation planning and programs. For decades
Other Flood Insurance Issues
Community floodplain managers often hear complaints about the NFIP centered around what is covered and what is not; and the inability to get additional coverages like living expenses as part of a NFIP policy. ASFPM has been impressed with
* ASFPM recommends
Consistent with ASFPM's overall philosophy laid out in this testimony, the roll-out of Risk Rating 2.0 should strive to do no harm to the floodplain management and flood mitigation elements of the NFIP. As the roll-out of the program continues, while recognizing the many benefits of Risk Rating 2.0, many of our members have expressed concerns about how this will impact floodplain management and flood mitigation. ASFPM has been engaging with
In Conclusion
Floods are this nation's most frequent and costly natural disasters and the trends are worsening. The NFIP is the nation's most widely used tool to reduce flood risk through an innovative and unique mix of incentives, requirements, codes, hazard mitigation, mapping and insurance. At the same time, we understand the four main pillars of the NFIP are interconnected; and making significant changes to one pillar without thoughtful consideration of the impact on the other three can erode the program overall. The NFIP is a key tool in the toolbox that serves policyholders, taxpayers and the public well.
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Original text here: https://financialservices.house.gov/uploadedfiles/hmtg-117-ba04-wstate-mchughk-20220525.pdf
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