Congress faces ticking clock on flood insurance as hurricane season picks up

Congress is facing a time crunch to prevent a lapse for the National Flood Insurance Program (NFIP) as hurricane season intensifies.

As fears of a shutdown swirl around a heated funding debate in Washington, D.C., there is some concern that the NFIP’s authorization could get entangled in the fight.

Funding for the federal government and the NFIP’s authorization will both expire after Sept. 30, and lawmakers are nowhere close to reaching a deal to avoid a shutdown.

Previously issued federal flood insurance policies would still be active if the NFIP isn’t reauthorized. But the program would be unable to issue new policies and face other funding constraints as thousands of Americans grapple with the damage of hurricanes.

“A lapse of the NFIP at the height of hurricane season would be an apocalyptic nightmare,” Sen. Bob Menéndez (D-N.J.) told The Hill in a statement this week. 

“Families have faithfully paid their premiums, in many cases for years and even decades, and it’s Congress’ responsibility to ensure the NFIP is fully authorized to pay out claims and write new policies.” 

Research finds the program’s lack of authority to issue flood insurance policies could also derail thousands of real estate transactions. 

Leaders on both sides of the aisle are eyeing a continuing resolution (CR) to prevent a shutdown. A CR would freeze government funding at current levels and give Democrats and Republicans more time to strike a deal.

But Speaker Kevin McCarthy (R-Calif.) is struggling to lock down support from House conservatives as the party’s right flank seeks to use the deadline as leverage for spending cuts.

“McCarthy has said he wants to do a CR into early December,” Bill Kilmer, chief lobbyist at Mortgage Bankers Association, said, but he noted questions remain around what “an appetite for CR or what the duration of an acceptable CR would be” for the conference.

“That’ll be kind of an opening salvo that will include policy questions like flood insurance,” he told The Hill.

A spokesperson for Senate Banking Committee Chairman Sherrod Brown (D-Ohio) told The Hill that the “committee will continue to work to ensure the program does not lapse.”

Kilmer said the stakes “are already pretty high” for the program with the coming reauthorization deadline. The current hurricane season “certainly heightens awareness,” as Tropical Storm Idalia travels the Southeast, he added.

Idalia hit Florida earlier this week as a Category 3 hurricane, leaving thousands of homes without power as winds estimated to reach 125 mph. It was reportedly the strongest storm to reach the state’s Big Bend region in more than a century and helped drive the fifth-highest tide levels since 1921 in Charleston Harbor, S.C.

Idalia has since been downgraded to a tropical storm and is moving along the Carolinas.

Analysts are already beginning to assess the costs, with some recent estimates placing the price tag for insurance claims in the range of about $9.36 billion.   

A report released by the National Centers for Environmental Information found that the U.S. saw 15 billion-dollar disasters in the first seven months of this year — the most in more than four decades.

“People can speculate why we’re having more of these particular events, but obviously if you got the severe weather [of] what’s happening in Florida, that can put a strain on the system for any of these programs,” Kilmer said.

According to the Congressional Research Service (CRS), the flood insurance program has more than 5 million policies that provide more than $1 trillion in coverage, filling in a gap left by private insurance.

The program is part of the Federal Emergency Management Agency and funded in part through premiums and other payments from policyholders. The annual appropriations process also funds activities such as mapping flood hazards and analyzing risk. 

The NFIP was not “designed to retain funding to cover claims for truly extreme events,” the CRS wrote, and was able to borrow “relatively small amounts” from the Treasury Department to pay claims and eventually repay loans with interest.

But this has changed over the years, as the nation has seen more extreme weather.

Following the 2005 hurricane season, the office said the borrowing limit to cover claims was upped to more than $20 billion after deadly hurricanes like Katrina left thousands without homes. The limit was later increased to $30.4 billion following Hurricane Sandy in 2013.

Joseph Kane, a fellow at the Brookings Institution, and other experts say the current funding structure is not sustainable. 

“It wasn’t designed to handle these huge bursts in climate risk and huge climate costs,” Kane said.

“So, I think that’s a challenge facing federal leaders, but obviously, of course, state [and] local leaders across the country. I mean, are they just gonna keep rebuilding in all these places?”

The program owed more than $24 billion at the onset of the 2017 hurricane season, the CRS found, when the nation was hit by hurricanes Harvey, Irma, and Maria. Lawmakers canceled $16 billion of the program’s debt in October, and the debt shot up to more than $20 billion not long after.

“We need a model of resilience rather than a model of disaster recovery, because the costs are just so significant once disaster hits — the recovery costs that is — that is just impossible to stay ahead of,” Kane said.

Lawmakers have weighed potential reforms to the program in recent years and have passed 25 short-term reauthorizations since fiscal 2017.

Some experts also see a crisis taking hold in the private insurance market.

“We’ve got an insurance crisis really around the country in certain key states, homeowners’ insurance availability, where some big carriers are pulling out,” Kilmer said. “This is really cute on the commercial multifamily side as well.”

“It’s generally California, Florida, states like that, but we’re hearing about it from members all around the country,” Kilmer said, adding that there’s “not enough availability to close that gap” on the private insurance end. He argued that “underscores that critical need” to prevent a lapse for the NFIP.

–Updated on Sept. 1 at 9:13 a.m.