As Risks Rise, An Overhaul Announced for Federal Flood Insurance

A flooded Army National Guard facility in Ashland, Nebraska on March 17, 2019.

A flooded Army National Guard facility in Ashland, Nebraska on March 17, 2019. Courtesy Herschel Talley/Nebraska National Guard

The Trump administration has announced plans to overhaul the federally subsidized National Flood Insurance Program, increasing policy premiums to more accurately reflect flood risk and home values starting in October 2020. The decision comes in the midst of historic flooding that has displaced thousands of people and destroyed homes, farms, and infrastructure across parts of the U.S. Midwest.

The National Flood Insurance Program is run by the Federal Emergency Management Agency (FEMA) and covers more than 5 million properties across the United States, both those in coastal and inland flood zones. A string of costly natural disasters and worsening flooding caused by sea level rise has saddled the program with debt, topping $30 billion in 2017, Bloomberg News reported.

“This is badly needed,” Shana Udvardy, a climate resilience analyst for the Union of Concerned Scientists, said of the overhaul. She called the shift “a huge step in the right direction, so we can let communities, particularly those communities that have been repetitively flooded, know what their actual risk is.”

To date, the program has largely set policy premiums based on whether a home is in the 100-year flood zone; it doesn’t account for a home’s value or its proximity to a body of water. In addition, FEMA’s flood maps have long been criticized as being out of date, not accurately reflecting flood risks in an era of climate change. FEMA said its overhaul will address these issues.

“What we’re going to do is change an insurance-rating structure that hasn’t fundamentally been changed since the 1970s,” David Maurstad, FEMA’s deputy associate administrator for insurance and mitigation, told The Wall Street Journal. “We’re going to consider more flood risk than we currently do now.”

FEMA plans to announce its new rates in April 2020, with them taking effect October 1. Because Congress restricts how much FEMA can increase policy rates, the agency plans to phase in changes over the next several years, Maurstad said.

Private insurers, which today provide just 5 percent of residential flood insurance policies nationwide, are also returning to the market, E&E News reported. New technology and mapping is allowing these companies to create detailed assessments of properties’ flood risks. “We’re all trying to accomplish more coverage,” Christopher Heidrick, chairman of the flood insurance task force of the Independent Insurance Agents & Brokers of America, said. “There’s no question that recovery is much faster on a structure that’s insured than on a structure that’s not insured.”