Tabs

Bank Insurance Agency Management
Community Banks and Insurance
Compliance and Risk Management
Wealth Management
Insurance Product Marketing
Advocacy

Tuesday, April 19, 2016

Waters Responds to Flood Insurance Rate-Setting Report

Ranking Member Maxine Waters (D-CA) responded to a Government Accountability Office (GAO) report released today on the Federal Emergency Management Agency’s (FEMA) rate-setting methods under the National Flood Insurance Program (NFIP) and the Agency’s progress in ensuring that full-risk rates accurately reflect flood risk.

Waters requested the report in 2014 when Congress was working to address the unintended consequences of premium increases under the 2012 Biggert-Waters Flood Insurance Reform Act. The GAO had previously identified problems with FEMA’s rate-setting processes following concerns that they do not reflect actual flood risk, which has contributed to the insolvency of the NFIP. In the report released today, GAO found that FEMA has made headway in addressing prior GAO recommendations but that more work still needs to be done.

“I am pleased that FEMA has been working diligently on this issue and I urge the agency to continue carrying out GAO’s important recommendations,” Ranking Member Waters said. “The additional data needed to refine FEMA’s rate-setting processes will help us as we continue to work on crafting an affordability framework that will ensure the NFIP’s ability to provide affordability protections for homeowners across the country and ultimately the long-term stability of the NFIP.”

The report identified the following actions FEMA must take to fully address the GAO’s recommendations:
  • Finish collecting flood probability and damage estimate data and update the rate-setting model as appropriate.
  • Collect information on all grandfathered policies and determine the financial impact of these policies on the NFIP.
  • Collect the information needed to determine full-risk rates for subsidized properties.
GAO also noted the costs and challenges FEMA has faced in implementing the recommendations. For example, the report states that “flood studies and updating maps can be expensive, so the NFIP strategy is to carry out the updates in densely populated areas” and that “the agency faced a cost challenge with respect to elevation certificates, which are needed to determine full-risk rates for subsidized properties.”

Waters has long been concerned with the costs associated with the NFIP, particularly those that are passed on to policyholders, and the ability to maintain affordable premiums. She has called for increased funding for mapping activities and is urging Congress to forgive the $23 billion in debt that the program has incurred following devastating weather events over the last decade.

Read the GAO report.