A man helps to install a new street lamp in New York City after the old ones were destroyed in flooding brought by Hurricane Sandy. . (Spencer Platt / Getty Images)
The National Flood Insurance Program (NFIP) is on an unsustainable path and leaves the government open to huge potential losses, according to the head of the agency that runs the program.
Craig Fugate, the administrator of the Federal Emergency Management Agency (FEMA) at the Department of Homeland Security, said at a hearing of the Senate Appropriations Homeland Security Subcommittee on July 23 that the insurance program — which helps cover losses in flood-prone areas of the country — is currently insuring about $1 trillion in assets.
He said the agency is barely able to keep up with the interest payments from the program, even with low rates provided by the Treasury Department.
“This is not a sustainable risk that we can continue to do with no change,” Fugate said. “We have to figure out the best way to manage that risk.”
The amount of money FEMA has borrowed to maintain the insurance program has continued to increase. In November 2012, FEMA owed $20 billion, but that number has since grown to more than $24 billion, according to FEMA.
Congress needs to look at ways to rein in program costs, whether that means changing insurance rates or deciding to put more resources into encouraging people to live outside of flood-prone areas, according to Fugate.
“We have to look at what is sustainable,” Fugate said. “We have to think about where we build in the future and how we move forward.”
He said the agency is also working to revamp some of its policies and systems in the wake of the Homeowner Flood Insurance Affordability Act passed by Congress in March 2014, which capped insurance-rate increases and mandated a review of how the agency creates flood maps.
But with current budget resources and the time it takes to draft flood maps and engage local and state governments, it will take more than three years to create new maps for the country, according to Fugate. The authorization for the NFIP expires in 2017.
Sen. Mary Landrieu, D-La., the chairwoman of the subcommittee, said Congress has to be focused on building a new flood-insurance program that is responsive to communities and does not damage local economies through high premiums.
But she said she was willing to provide FEMA with the resources it needs to revamp its operations and speed up its mapping and insurance adjusting processes.
“I believe it’s imperative that Congress remain active and engaged to ensure that this agency and its partners have the resources they need to do their jobs,” she said.