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Flood Insurance Program needs additional reforms

Last summer, Congress enacted changes to the National Flood Insurance Program (NFIP) that will result in dramatically higher flood insurance costs for many policyholders.

To account for the true costs of flood insurance, the bill phases in premiums that reflect the full flood risk of each insured building. Congress clearly wants to restore the fiscal soundness of the NFIP (which owed the U.S. Treasury $17 billion prior to Hurricane Sandy) and expects people who occupy floodplains to shoulder more of the costs.

The legislation phases out insurance subsidies for several categories of buildings, including second homes, business properties, new policies and newly purchased property. Without these subsidies, insurance costs will be based on the elevation (or flood protection level) of the structure. The resulting rates can be quite high, particularly for buildings with basements.

Other changes will affect rates for all flood insurance policies, which can rise by up to 20 percent per year. The bottom line is that premiums are going to rise significantly in future years. Unfortunately, Congress did not address the affordability of flood insurance, other than to authorize a study.

The New York State Floodplain and Stormwater Managers Association recognizes the need for NFIP reform, but is concerned about the impact this legislation will have on business districts and real estate markets in older floodplain communities. The association will continue to advocate for additional reforms to the flood insurance program in order to achieve the multiple objectives of affordability, fairness and fiscal soundness.

James B. Jones

Region 9 Director, NYSFSMA

Buffalo