Meet the US National Flood Insurance Program
On Thursday March 16, the United States Office of Management and Budget released its initial proposed budget for the next fiscal year. You probably have heard all about this elsewhere around the internet today, and if you still get a newspaper it’ll be on the front page tomorrow. You might have heard about some of the impacts of this budget on Earth Science; for example, it proposes ending several NASA satellites that could be used to measure the effects of climate change.
I didn’t feel like repeating all of that commentary, but instead today I want to tell you a story about one line in this budget document. The budget removes all funding for one part of the US National Flood insurance program, the Flood Hazard Mapping Program, and directs it to “to instead explore other more effective and fair means of funding flood mapping efforts.”
Honestly, if you don’t live near the coast, you might not even know that the US has a National Flood Insurance Program or a flood-mapping program. But, this program isn’t just important for people who live there; it affects everyone in the country as every US taxpayer is currently helping support this program.
A century ago, private insurance companies handled flood insurance in the US. However, as the amount of construction in flood-prone areas increased in the 20th century, insurers found that they were on the hook for costs they couldn’t anticipate. By the 1920s, private insurers stopped offering flood insurance almost entirely – this was the flood insurance version of an insurance “Death spiral” where costs of the insurance go up, causing fewer people to buy it, causing costs to go up even farther.
One basic problem of flood insurance is that an insurer can’t control the flood risk. If a home is sold in a floodplain and the flood risk is assessed one year, construction upstream that removes wetlands will increase the flood risk everywhere downstream and the insurer providing the coverage may not even know that development happened. Similarly, changing sea levels and warming oceans have substantially changed the storm risk in many coastal communities already. These are factors that private insurers simply couldn’t account for.
From the 1930s through the 1950s, the US government responded to floods with disaster declarations by distributing funds to rebuild. However, they also realized that having developers and homeowners share none of the risk would encourage construction in high risk areas – if you don’t have to bear the cost of rebuilding at all, why not build the most expensive property you can in the highest risk area?
In 1956, the US government established a federal flood insurance program backed by the US taxpayer. Using the best available geologic maps, the government would assess flood risk and require development in those floodplains to buy insurance so that all of the costs of flooding were not born out by US Taxpayers.
Many of the U.S.’s floodplain maps were initially done following the establishment of this program and date back to the 1960s for exactly this reason. However, as noted above, maps from decades ago can’t reflect changes in flood risk associated with new development, geologic changes, or climate change. Re-mapping floodplains every few decades is an absolute requirement for the government to run this program.
Today, the U.S. has many structures covered by this insurance program and in many ways coastal development would be impossible without it. However, the program has serious issues. In 2005, a disaster unlike any that the Flood Insurance Program had ever seen struck New Orleans - we know it as Hurricane Katrina. The claims after that storm totaled the tens of billions of dollars – far more than the program collected. In 2012, another one happened – we know it as Hurricane (superstorm) Sandy.
The costs associated with these disasters were not taken into account by the premiums coastal homeowners pay, nor were they predicted by the geologic maps at the time. Ironically, much of the coastline struck by Sandy was slated for re-mapping just before the storm hit.
As of today, the US National Flood Insurance Program is $25 billion in debt due to the costs of these storms. The U.S. Treasury department, aka the US Taxpayer, is providing funds to support this program right now, with over a billion dollars spent to support it in 2016 alone.
Remapping these areas will not prevent the next hurricane Katrina if there is one, as much of that disaster occurred not because of the storm’s power but because of engineering failures. But assessing the potential flood risk associated with storms like Sandy and charging landowners appropriate insurance fees in those areas is important to the US Government and to the US Taxpayer.
If the US is undercharging insurance premiums because our maps are out of date, then the US taxpayer is effectively providing a subsidy to flood-prone property owners and developers. The subsidy the US Taxpayer provided to the flood insurance program in 2016 would have paid for continuing this mapping program for 10 years.
While the document does direct the government to identify alternative funding sources, with the Flood Insurance Program already in debt there is no obvious place they could come from. This is one of those basic things the government does – it enables development in at-risk areas by spending money to develop science. Without this program, either the US Taxpayer would be paying the cost of rebuilding after every disaster, or there would be far less development in these regions.
This picture shows flooding in Ocean City, Maryland, after a noreaster in 2015. Many communities along the coastline are regularly experiencing this degree of flooding, and as sea level continues marching higher over the next century it will get worse. Right now it just takes a moderate storm or the moon at perigee to cause flooding in areas that the U.S. government is insuring and the U.S. taxpayer is supporting. The only way this program can be managed is by keeping our maps up to date, reflecting development, sea level change, and climate change.
This type of work will never be done by private insurance – they stopped providing this coverage because they weren’t going to map the entire country. If the government doesn’t do it, and our maps don’t assess flood risk correctly, then we’ll have to keep sending taxpayer money to this program and supporting real estate on the coastline that should not be there. The current mapping program is not perfect, it could be improved with updates and additional funds to enable use of new and modern satellite and GPS mapping technologies, but this proposed cut goes the exact opposite way. This is an example of a program where cutting it is “penny-wise, pound foolish” –cutting a small expense sets up a much larger expense later.
-JBB
Image credit: http://bit.ly/2myYGV7
References: http://bit.ly/2nvjrBO (pdf file) http://bit.ly/2nsBMmf https://www.nap.edu/read/21709/chapter/4#24
