Studies of Voluntary Community-Based Flood Insurance Optionsby Representative Sheila Jackson Lee
Posted on 2013-03-12
JACKSON LEE. Mr. Speaker, I rise in support of H.R. 1035, a bill
``To require a study of voluntary community-based flood insurance
option and how such options could be incorporated into the national
flood insurance program, and for other purposes.''
More specifically, this bill directs FEMA to study options, methods,
and strategies for making voluntary community-based flood insurance
policies available through the National Flood Insurance Program.
Moreover, this study would include a strategy to implement options that
would encourage communities to undertake flood mitigation activities.
Flooding is the most common and costly natural disaster in the United States. 90 percent of all presidential-declared U.S. natural disasters involve flooding. Flooding occurs in all 50 states and chronically impacts many communities, including my constituents in the 18th district of Texas.
In Houston, there are a number of areas which are frequently flooded from excessive rainwater in bayous. These areas include the Buffalo Bayou, the Greens Bayou, and the Halls Bayou. These areas, and others across this nation, could greatly benefit greatly from this study.
In 1968, the U.S. Congress established the National Flood Insurance Program, NFIP, to address the nation's flood hazard exposure and challenges inherent in financing and managing flood risks in the private sector.
The program has played a central role in U.S. flood risk management policy; that is, the prevention and recovery from flooding disasters. Under the NFIP, the federal government (1) identifies areas of flood risk; (2) encourages communities to implement measures to mitigate against the risk of flood loss; and (3) provides financial assistance, through contracts of insurance, to help individuals and small businesses recover rapidly from flood disasters.
Until 1986, the NFIP was financially self-supporting from policy premium revenue and fees that covered all expenses and claim payments.
However, because of its below-market insurance rates and catastrophic hurricane-related floods in recent years, the NFIP has accrued a substantial debt that as of September 30, 2011, stands at $17.75 billion. Under current law, the funds borrowed from the U.S. Treasury must be repaid with interest.
Because the NFIP cannot charge risk-based premiums for all of its policies, hold loss reserve funds to offset unusually catastrophic losses, or purchase reinsurance, the program faces a constant risk of financial insolvency.
The NFIP currently covers approximately 5.6 million households and businesses across the country for a total of $1.25 trillion in exposure.
The National Flood Insurance Program, NFIP, was established in response to increasing Federal Government spending for disaster relief.
Standard homeowners insurance does not cover flooding and therefore offers no protection from floods associated with hurricanes, tropical storms, heavy rains and other conditions. The NFIP mandates that federally regulated or insured lenders require flood insurance on properties that are located in areas that have a high risk of flooding.
Unlike private insurance programs, the NFIP is not actuarially sound; it is not designed to ensure that its premiums will cover the average claims and expenses expected over the long run. By law, some NFIP policyholders receive insurance at rates that are subsidized. Such subsidies are mainly granted to property owners whose properties were built before their communities joined the program and are intended to encourage communities to participate in the program and thus mitigate potential losses.
[[Page H1341]] H.R. 1035 would study the means by which communities can enhance their own ability to recover from flooding. Giving communities the opportunity to effectively become the policyholder of a flood insurance program, rather than individual property owners, renters, or businesses, would potentially yield several benefits.
The study produced by H.R. 1035 would explore the policy of community-based flood insurance to find ways to incentivize communities to mitigate future flood losses, as well as to provide them with a greater role in determining flood risk assessment, mapping, and insurance pricing.
Furthermore, the study would allow communities to implement mandatory flood insurance purchase requirements tailored to a community's individual needs.
Moreover, the study would reveal the extent to which community-based flood insurance may produce economies of scale for a community, streamlined underwriting, as well as reduced administrative costs for the insurer.
Community-based flood insurance programs have the potential for the development of synergies between local communities and the National Flood Insurance Program.
For these reasons, I urge my colleagues to support the H.R. 1035, which directs FEMA to study how to improve our national system of disaster insurance with respect to community-based flood insurance. This bill is a timely response to recent flooding disasters wrought by Hurricane Sandy, as well as sensible way to address future floods that occur in communities across our country.
The SPEAKER pro tempore. The question is on the motion offered by the gentleman from Missouri (Mr. Luetkemeyer) that the House suspend the rules and pass the bill, H.R. 1035.
The question was taken.
The SPEAKER pro tempore. In the opinion of the Chair, two-thirds being in the affirmative, the ayes have it.