National Academies Press: OpenBook

Affordability of National Flood Insurance Program Premiums: Report 2 (2016)

Chapter: Appendix F: Letter to the Committee from Senator Mary L. Landrieu, Louisiana

« Previous: Appendix E: Biographical Sketches of Committee Members
Suggested Citation:"Appendix F: Letter to the Committee from Senator Mary L. Landrieu, Louisiana." National Academies of Sciences, Engineering, and Medicine. 2016. Affordability of National Flood Insurance Program Premiums: Report 2. Washington, DC: The National Academies Press. doi: 10.17226/21848.
×
Suggested Citation:"Appendix F: Letter to the Committee from Senator Mary L. Landrieu, Louisiana." National Academies of Sciences, Engineering, and Medicine. 2016. Affordability of National Flood Insurance Program Premiums: Report 2. Washington, DC: The National Academies Press. doi: 10.17226/21848.
×
MARY L. LANDRIEU
     LOUISIANA

United States Senate

WASHINGTON, DC 20510-1804 .

March 27, 2014

Mr, Jeffrey Jacobs

Director

Water Science and Technology Board

National Research Council

500 Fifth Street NW

Washington, DC 20001

Dear Members of the National Research Council Committee on the Analysis of Costs and Benefits of Reforms to the National Flood Insurance Program—Phase 1:

Thank you and your fellow National Research Council committee members for donating your time and energy to the Analysis of the Costs and Benefits of the National Flood Insurance Program (NFIP) authorized by the Biggert-Waters Flood Insurance Reform and Modernization Act of 2012 (P.L. 112-141). This review shall include an economic analysis that compares and contrasts the merits of charging full risk-based premiums versus the subsidized flood insurance policies that were a centerpiece of the program prior to 2012. The review shall assess the impacts each approach will have on Federal disaster response costs and the budget at large, and I appreciate this opportunity to offer my perspective on this important study.

The Federal Emergency Management Administration (FEMA) estimates that the NFIP saves American taxpayers $1.6 billion annually in avoided disaster response costs. Despite the fact that between 1978 and 2011, the program experienced just nine loss years in which flood loss payments exceeded premiums written, Section 100211 of Biggert-Waters gives FEMA the conflicting mandate of including catastrophic loss years when calculating average historical loss years in accordance generally accepted actuarial principles. I encourage the Committee to consider the viability and actuarial soundness of this methodology in the affordability study.

Section 7 of the Homeowner Flood Insurance Affordability Act (P.L. 113-89) directs the Administrator of FEMA to strive to minimize the number of policies with annual premiums that exceed one percent of the total coverage provided by the policy and report any instances in which premiums exceed that threshold. Section 16 of the same bill amends FEMA’s portion of the affordability study authorized under Biggert-Waters to include additional criteria such as the options for maintaining affordability if annual premiums exceed two percent of the liability coverage provided by the policy. It is clear that Congress has significant concerns about the overall affordability of flood insurance, and I urge this Committee to specifically evaluate the viability of different affordability thresholds as defined by the percentage each premium represents of the total coverage provided by the policy.

Suggested Citation:"Appendix F: Letter to the Committee from Senator Mary L. Landrieu, Louisiana." National Academies of Sciences, Engineering, and Medicine. 2016. Affordability of National Flood Insurance Program Premiums: Report 2. Washington, DC: The National Academies Press. doi: 10.17226/21848.
×

During a March 12, 2014 hearing of the U.S. Senate Committee on Appropriations Subcommittee on Homeland Security, Secretary Jeh Johnson acknowledged the importance of affordability and overall participation in the long-term solvency of the National Flood Insurance Program. As my colleague Congressman Steve Scalise (R-LA) said so eloquently on the floor of the House, “Sending somebody a $10,000 or a $20,000-a-year bill on a $200,000 house that never flooded is not an actuarially sound rate. It’s a death sentence.” While we have anecdotal data indicating poor compliance rates around 60% with the NFIP mandatory purchase requirement, it is imperative that this Committee provides reliable data about compliance and market penetration in this study to ensure the risk pool can sustain the program’s liabilities.

Lastly, I represent many coastal communities that are intimately familiar with flood risks and actively invest their own resources in mitigating their exposure to floods. Although FEMA has initiated a pilot program that is designed to give these communities credit for existing flood protection infrastructure, as it stands today, a $450 million, 40 mile levee that has never failed was literally wiped off the map in the new FEMA flood map was released for Lafourche Parish in 2008. This Committee should consider programs and initiatives that incentivize local investments in mitigation and reward communities that take a proactive approach to flood protection.

Over 55% of our nation’s Global Domestic Product is produced by the 15% of U.S. counties that are located directly on open ocean, the Great Lakes or in coastal floodplains. The National Flood Insurance Program was created with the explicit goal of making flood insurance available on reasonable terms and conditions so that people could live where they needed to work to power our nation’s economy. While I am proud of the progress we have made with the Homeowner Flood Insurance Affordability Act (P.L. 113-89), nothing is perfect. Nothing is permanent. We must remain vigilant and ensure people get the relief they need and deserve. I appreciate the opportunity to engage with the Committee and look forward to a timely delivery of the Phase I report later this year.

With warm regards, I am

image

MLL:jwk

Suggested Citation:"Appendix F: Letter to the Committee from Senator Mary L. Landrieu, Louisiana." National Academies of Sciences, Engineering, and Medicine. 2016. Affordability of National Flood Insurance Program Premiums: Report 2. Washington, DC: The National Academies Press. doi: 10.17226/21848.
×

This page intentionally left blank.

Suggested Citation:"Appendix F: Letter to the Committee from Senator Mary L. Landrieu, Louisiana." National Academies of Sciences, Engineering, and Medicine. 2016. Affordability of National Flood Insurance Program Premiums: Report 2. Washington, DC: The National Academies Press. doi: 10.17226/21848.
×
Page 119
Suggested Citation:"Appendix F: Letter to the Committee from Senator Mary L. Landrieu, Louisiana." National Academies of Sciences, Engineering, and Medicine. 2016. Affordability of National Flood Insurance Program Premiums: Report 2. Washington, DC: The National Academies Press. doi: 10.17226/21848.
×
Page 120
Suggested Citation:"Appendix F: Letter to the Committee from Senator Mary L. Landrieu, Louisiana." National Academies of Sciences, Engineering, and Medicine. 2016. Affordability of National Flood Insurance Program Premiums: Report 2. Washington, DC: The National Academies Press. doi: 10.17226/21848.
×
Page 121
Suggested Citation:"Appendix F: Letter to the Committee from Senator Mary L. Landrieu, Louisiana." National Academies of Sciences, Engineering, and Medicine. 2016. Affordability of National Flood Insurance Program Premiums: Report 2. Washington, DC: The National Academies Press. doi: 10.17226/21848.
×
Page 122
Next: Appendix G: American Community Survey 5-Year Data Products »
Affordability of National Flood Insurance Program Premiums: Report 2 Get This Book
×
Buy Paperback | $49.00 Buy Ebook | $39.99
MyNAP members save 10% online.
Login or Register to save!
Download Free PDF

When Congress authorized the National Flood Insurance Program (NFIP) in 1968, it intended for the program to encourage community initiatives in flood risk management, charge insurance premiums consistent with actuarial pricing principles, and encourage the purchase of flood insurance by owners of flood prone properties, in part, by offering affordable premiums. The NFIP has been reauthorized many times since 1968, most recently with the Biggert-Waters Flood Insurance Reform Act of 2012 (BW 2012). In this most recent reauthorization, Congress placed a particular emphasis on setting flood insurance premiums following actuarial pricing principles, which was motivated by a desire to ensure future revenues were adequate to pay claims and administrative expenses. BW 2012 was designed to move the NFIP towards risk-based premiums for all flood insurance policies. The result was to be increased premiums for some policyholders that had been paying less than NFIP risk-based premiums and to possibly increase premiums for all policyholders.

Recognition of this possibility and concern for the affordability of flood insurance is reflected in sections of the Homeowner Flood Insurance Affordability Act of 2014 (HFIAA 2014). These sections called on FEMA to propose a draft affordability framework for the NFIP after completing an analysis of the efforts of possible programs for offering “means-tested assistance” to policyholders for whom higher rates may not be affordable.

BW 2012 and HFIAA 2014 mandated that FEMA conduct a study, in cooperation with the National Academies of Sciences, Engineering, and Medicine, which would compare the costs of a program of risk-based rates and means-tested assistance to the current system of subsidized flood insurance rates and federally funded disaster relief for people without coverage. Production of two reports was agreed upon to fulfill this mandate. This second report proposes alternative approaches for a national evaluation of affordability program policy options and includes lessons for the design of a national study from a proof-of-concept pilot study.

  1. ×

    Welcome to OpenBook!

    You're looking at OpenBook, NAP.edu's online reading room since 1999. Based on feedback from you, our users, we've made some improvements that make it easier than ever to read thousands of publications on our website.

    Do you want to take a quick tour of the OpenBook's features?

    No Thanks Take a Tour »
  2. ×

    Show this book's table of contents, where you can jump to any chapter by name.

    « Back Next »
  3. ×

    ...or use these buttons to go back to the previous chapter or skip to the next one.

    « Back Next »
  4. ×

    Jump up to the previous page or down to the next one. Also, you can type in a page number and press Enter to go directly to that page in the book.

    « Back Next »
  5. ×

    Switch between the Original Pages, where you can read the report as it appeared in print, and Text Pages for the web version, where you can highlight and search the text.

    « Back Next »
  6. ×

    To search the entire text of this book, type in your search term here and press Enter.

    « Back Next »
  7. ×

    Share a link to this book page on your preferred social network or via email.

    « Back Next »
  8. ×

    View our suggested citation for this chapter.

    « Back Next »
  9. ×

    Ready to take your reading offline? Click here to buy this book in print or download it as a free PDF, if available.

    « Back Next »
Stay Connected!