In Deep: Dilemmas of Federal Flood Insurance Reform

Floods are the most expensive form of natural disaster in the United States. Recent massive floods in Louisiana show the magnitude of the devastation floods can cause. Climate change and population growth are likely to lead in the coming decades to more severe, frequent, and costly floods. How we pay for flood losses is an urgent public policy issue. The National Flood Insurance Program (NFIP) provides most of the flood insurance policies on homes in the United States. The U.S. Flood Insurance Program is a complex scheme that uses insurance coverage subsidies, mandates, and other tools to support various policies related to floods; in other words, it uses insurance to govern. Yet, the governance of the NFIP is limited; powerful factors constrain its impact, and the policies it furthers have long been criticized. This Article first showcases key aspects of the NFIP, including its structure and goals. Then it shifts to consider constraints on the almost fifty-year-old NFIP and outlines the current status of this program. Finally, it considers what sort of federal governmental involvement with insurance would be better for dealing with homeowners’ flood risk than the current system. In trying to reform the NFIP, Congress has gone in circles between 2012 and 2014 and will again consider reforms in 2017. Risk-based rates based on state-of-the-art maps and a small, means-based voucher program rather than the current general subsidies are reforms that both make sense and would be workable if introduced gradually. A comprehensive plan to address rising sea levels and other aspects of climate change is also a necessary, although unlikely, reform. In the meantime, a better flood insurance program can begin to steer us in the right direction