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Flood insuranceAfter hurricanes, Congress ponders future of flood insurance program

By Abby Livingston

Published 10 October 2017

The devastating hit Houston took from Hurricane Harvey has exacerbated — and highlighted — the enormous financial jam facing the National Flood Insurance Program. Thanks to the recent onslaught of hurricanes hitting Texas, Florida and Puerto Rico, there has never been a greater need for the program. But that need has also set off a new round of calls to dramatically overhaul a program that hasn’t been able to sustain itself without major subsidies from the U.S. Treasury.

The devastating hit Houston took from Hurricane Harvey has exacerbated — and highlighted — the enormous financial jam facing the National Flood Insurance Program.

Thanks to the recent onslaught of hurricanes hitting Texas, Florida and Puerto Rico, there has never been a greater need for the program. But that need has also set off a new round of calls to dramatically overhaul a program that hasn’t been able to sustain itself without major subsidies from the U.S. Treasury. 

Republican U.S. Rep. Pete Olson’s Sugar Land-based district suffered some of the most intensive flooding in the state. He said he is open to some changes, but not if it risks payouts on Harvey claims his constituents are filing. He is quick to underscore the desperation in his suburban Houston district and doesn’t want changes to make things worse.

It should be part of the package but not a do-all, end-all,” Olson said of any potential overhaul.

Established in 1968 to help homeowners living in flood-prone areas that private insurers wouldn’t cover, the program has never been on steady financial footing, and continued construction in low-lying areas — as well as more frequent and powerful storms attributed to climate change — have put the NFIP deeply in the red.

As a result, Congress repeatedly finds itself re-authorizing new money to support the program. Even before Hurricanes Harvey and Irma, the program was set to expire on Sept. 30, and no new insurance policies can be written until it’s re-authorized again. 

Few home insurance policies cover flood damage, and nearly all U.S. flood insurance policies are issued through the program. To qualify for national flood insurance, a home must be in a community that has agreed to adopt and enforce various policies to reduce flooding risk. The program has more than 584,000 active policies in Texas, more than any state but Florida. 

It’s hard to find a member of Congress who will call for an outright abolition of the program, which would likely destabilize real estate markets and property tax bases in those areas. So the aim among some legislators is to pass laws that will encourage homeowners to move into the private market.

One option is to raise the premiums for government insurance to help sustain the program, discourage new construction in high-risk areas and hope that as rates rise, more private companies will enter the flood insurance market.

The fear of many lawmakers who represent these homeowners is that a substantial rise in rates will be more than some can afford.