Time To Modernize Our National Flood Insurance Program
By U.S. Senator Bill Cassidy (R-LA) and U.S. Representative Blaine Luetkemeyer (R-MO)
Nov 17, 2017
After an extremely destructive and challenging hurricane season, Americans who were affected are working to recover and rebuild. Assisting them now is critical, but this hurricane season has been a deadly reminder that we must do more to prepare for future flood disasters. We need a long-term solution that strengthens and stabilizes the National Flood Insurance Program (NFIP) and reduces the costs borne by American taxpayers.
Continuing to allow the Federal Emergency Management Agency (FEMA) to more properly manage its risk with the assistance of the private reinsurance and insurance-linked securities markets can accomplish this goal.
The federally-backed NFIP was created more than half a century ago to ensure at-risk property owners would have access to affordable flood insurance coverage. At the time, most experts viewed these property owners as uninsurable. Thanks to technological advances, private insurers now have the ability to more accurately predict and price flood risk. But the private flood insurance market has been sidelined by antiquated and preferential rules, leaving those required to purchase flood insurance with little to no choice in their coverage options and a mandate to pay for what is often an insufficient and outdated policy.
We each have different ideas about what kind of NFIP reforms Congress should pursue, but as our colleagues in the U.S. House of Representatives and Senate continue to discuss NFIP reform, one key issue we agree on is the need to spread out the risk to capital markets through insurance linked securities—also known as catastrophe bonds—and private reinsurance. Transferring risk to the capital markets will help protect American taxpayers and NFIP policyholders from future losses. …