National Flood Insurance Program faces a sea of uncertainty

Already awash in red ink before Hurricane Harvey, the fate of the federal program rests in the hands of a fractious Congress

A pickup plows through the Beach Street Canal, aka Beach Street in Vineyard Haven, after heavy rain swamped street drainage on the afternoon of July 7. —Rich Saltzberg

The clock on the National Flood Insurance Program (NFIP) was already ticking loudly before Hurricane Harvey ravaged Texas. Before Harvey, the NFIP was about $25 billion in debt, with just $1.7 billion of cash and $5.8 billion borrowing capacity. This week the federal government asked Congress to approve $7.85 billion in relief funding, and the damage estimates are climbing daily.

Moody’s estimates total losses from Hurricane Harvey will come in between $45 billion and $65 billion.

The deadline for Congress to vote on funding the NFIP is Sept. 30. If it does not vote to fund the program, it could spell disaster if disaster strikes.

Flood insurance premiums have been increasing, in large part to pay for the damage left by Superstorm Sandy and Hurricane Katrina. After Superstorm Sandy, the NFIP paid out $8.1 billion in claims to roughly 144,000 policyholders. Hurricane Harvey has flooded about 444,000 policyholders, which is only about 20 percent of Texans affected by the disaster, according to the Federal Emergency Management Agency (FEMA).

The NFIP was created by Congress in 1968 because few carriers provided flood insurance. In recent years, many in Congress have been calling for an end to the program, saying it encourages development in areas that shouldn’t be developed, usually with upscale homes, leaving taxpayers to foot the bill.

Some 25 percent of subsidized coastal NFIP properties are vacation homes, and the median value of an NFIP-insured home is about twice that of an average American home, according to a study by the Congressional Budget Office.

According to FEMA, the NFIP, through participating insurance agents, has issued 64,305 policies in Massachusetts — 962 of those are on Martha’s Vineyard, and cover $293 million worth of property.

Will the NFIP be solvent if a hurricane strikes the Cape and Islands this busy hurricane season? Right now, the future of the program is as hard to predict as a hurricane’s path.


Congress holds the key

Congressman Bill Keating is a member of the Homeland Security Committee, which oversees FEMA, which oversees the NFIP. He also played a key role in the the drafting and passing of the Homeowner Flood Insurance Affordability Act, the most recent federal flood insurance legislation, signed into law in March 2014 by President Obama.

On Friday, Mr. Keating spoke to The Times about the present condition and prognosis of the NFIP. He said he doesn’t believe that Hurricane Harvey will bankrupt the program, but it may well push rates higher in the future.

The most pressing concern, in his view, is if Congress doesn’t vote to fund the NFIP by the Sept. 30 deadline. Should that happen, new NFIP policies will not be written, and current policies could be affected.

“We don’t know right now how it will shake out,” he said. “We’re facing a government shutdown again, if our budget runs out without an alternative in place, and then there’s healthcare; I could go on and on. Day one of this administration, Paul Ryan called this a ‘unity government that’s going to get things done.’ Well, how’s that working?”

Craig Fugate, FEMA administrator under President Obama from May 2009 to January 2017, recently said the NFIP should be authorized for at least a year, but that insurance on new construction in flood zones should be left to the private sector.

Rep. Keating disagreed. “The trouble you have with a blanket policy of new construction is, given these superstorms, where do you draw the line?”

The most likely course of action, in Rep. Keating’s view, is for Congress to “kick it down the road until the end of the year, like they’re doing with everything else.” But with Hurricane Irma lurking and Tropical Storm Jose lining up behind her, demands on the program could change dramatically.


Tragedy brings unity

Rep. Keating said President Trump helped set the tone for the current uncertainty by cutting disaster relief by 9 percent in the federal budget.

“Some of the bipartisanship gains we made over the years on this issue really have dwindled, unfortunately,” he said. “The ideological divide of people saying government shouldn’t be involved in insurance has resurfaced. There’s a push to shift to private insurance, but private insurers would cherry-pick and insure the least risky, and leave the riskier properties for the federal government. Perhaps what happened in Texas will change that. We’ll find out when we go back [to Washington]. A huge majority of Texas Republican Congressmen didn’t vote to fund Sandy [relief]. It should be solely based on helping people. In the long run, this disaster may affect support for the better.”

Rep. Keating is pushing for the federal government to forgive the NFIP debts incurred after Hurricane Katrina and Superstorm Sandy, which were a one-two punch that knocked the NFIP off its financial footing. “Going back and paying for these superstorms, we’ll never get out of that debt,” he said. “There were no problems with flood insurance stability until Katrina.”

The Senate version of the bill to re-up for the NFIP extends the program six years out. Democrats have been pushing to keep “grandfathering” — keeping a home in its original flood zone designation even when zones are changed — and hope to gain concessions from Republicans on the issue as Hurricane Harvey relief is negotiated. “Homeowners shouldn’t be penalized for adhering to what the standards were at the time,” he said.

Rep. Keating believes the massive rebuilding after Hurricane Harvey should be financed directly from the federal government, independent of the financially strapped NFIP.

“With wildfires, earthquakes, and other disasters, the government just comes in and helps deal with it,” he said. “Government has a role in helping citizens through cataclysmic disasters. But they don’t have the same attitude with floods. With a federal cap for disasters across the board, then you’re insuring for a lesser amount, which will drop insurance rates significantly. That’s my view, and many others. We help other countries through disasters; let’s help our own people through disasters.”

Creating that federal funding may require raising the federal debt ceiling, also by Sept. 30, which is anathema to many hard-line Republicans.


CRS saves dollars and makes sense

As he has done for years, Rep. Keating urged Vineyard towns to join the Community Ratings System (CRS) as a way to improve preparedness, and to keep flood insurance more affordable.

This July, he introduced HR 3135, the Community Flood Insurance Savings Act. The legislation is intended provide resources so municipalities with areas at elevated risk of flood can form regional partnerships, sharing the costs of participation in the National Flood Insurance Program’s (NFIP) Community Rating System (CRS) and hiring regional-level CRS program coordinators.

“The Community Ratings System can decrease flood insurance premiums for people from 5 percent up to 45 percent. In many cases, towns are already doing what it takes to earn credits,” he said.

The CRS program was begun by FEMA in 1990 to encourage communities in flood-prone areas to take preventive measures that exceed NFIP standards. In exchange for a community’s proactive efforts, policyholders receive reduced flood insurance premiums. The CRS also provides incentive for communities to expand public outreach efforts, so residents can keep up with constantly evolving and often byzantine flood insurance regulations.

None of the six towns on Martha’s Vineyard is enlisted in the CRS. Chilmark is not a NFIP participant, so only five towns are eligible for the program.

The revised FEMA Flood Insurance Rate Maps (FIRM) for the Vineyard, which evaluate the probability of flooding in a given area in a “100-year storm,” were released in February 2016. Not surprisingly, given sea-level rise predictions, the flood zones expanded. In Oak Bluffs, one of the Island’s most vulnerable towns, 311 new structures were added, in addition to 166 acres of land.

As of May 2017, 341 communities in Massachusetts were participating in the NFIP. Of these communities, 18, or about 5 percent, were in the CRS.

Part of the reason so few towns currently participate in the CRS is the onerous application process — the CRS manual tops out at more than 600 pages. It can take many months, even years, to qualify, and enrollment has to be renewed by FEMA every five years.

Rep. Keating encouraged the Vineyard to look at regional CRS planning, which has proven successful in Barnstable County, which has the only regional CRS qualification in the country.

“The insurance rate in Barnstable County has gone down an estimated 15 percent,” he said. “The CRS doesn’t just benefit ratepayers. Communities also buy up land in zones most prone to flooding. It requires zoning and building codes that reduce the risk for insurers and to people who live there.”

Currently, eight towns in Barnstable County participate in the CRS program: Chatham, Harwich, Wellfleet, Mashpee, and Eastham have earned 10 percent discounts for residents, while Orleans, Provincetown, and Brewster have qualified for 5 percent discounts.

“Maybe some people on the Vineyard should reach out to Barnstable County and see if they can become part of their effort,” he said. “Plymouth County is actively discussing doing the same thing as Barnstable County. It helps defray the cost when you do it collectively.”

“We’ve doubled the number of CRS communities in the first two years,” Shannon Jarbeau, CRS coordinator for Barnstable County, told The Times. “Orleans has a five-year [FEMA] audit in October; we’re hoping to get them up to 10 percent. We kept Chatham from falling out of the program, which was great.”

Ms. Jarbeau said she has had informal conversations with the Martha’s Vineyard Commission (MVC) about creating a regional CRS: “The towns don’t have to work together; it’s just that one entity has to manage the programs. My full-time job is to manage this program, so it could be hard for the MVC because they don’t have a full-time person. But I am available to help guide them. There has been some discussion about me potentially contracting out to other communities and help get them set up.”

MVC executive director Adam Turner endorsed the idea. “We’ve identified coastal resilience as something we want to tackle this fall,” he said. “If we can bring in someone that adds value and has the experience [Ms. Jarbeau] does, we’d absolutely want to bring her in.”