Closing the Floodgates: Reforming the National Flood Insurance Program

The National Flood Insurance Program (NFIP) was designed to protect homeowners, but it’s putting their safety and the environment at risk. Unfortunately, the federal program encourages construction in environmentally sensitive areas. It’s also drowning in over $17 billion in debt and drying out the wallets of taxpayers. Conservationists and tax and free market advocates agree that the NFIP needs to be reformed, and a new bill in Congress could help close the program’s floodgates.

Extreme flooding near Nashville, Tennessee in May 2010.

H.R. 1309, the Flood Insurance Reform Act of 2011, is a first step in reforming the NFIP. “This bill makes great strides towards removing subsidies that have incentivized high risk development of environmentally sensitive areas”, says Josh Saks, senior legislative representative for NWF’s water resources campaign. Currently, the NFIP charges below market rates for flood insurance, which encourages development in flood prone areas. These areas, if left undeveloped, would serve as natural protective buffers against flooding. The new reform bill would require people to pay market-based rates for flood insurance, which makes it less attractive to build in a risky area. H.R. 1309 also seeks to have every property included in floodplain maps.  As a result, taxpayers will be more informed about which properties carry flood risk and how they can protect themselves.

“But, there is more that can be done,” Saks says about the Flood Insurance Reform Act. While the bill makes many necessary and welcome changes to the NFIP, it does not encourage mitigation of flood risk and does not pay down the program’s massive debt. H.R. 1309 recently passed in the House Financial Services Subcommittee on Insurance, Housing and Community Opportunity. Committee members will continue working on provisions in the bill before it moves to the full committee. NWF will continue urging Congress to protect the environment and public safety through flood insurance reform.