The National Flood Insurance Program (NFIP) is on a temporary extension until July 31st. All acknowledge reauthorization is needed as are reforms to a program that is billions in the hole. But reforms require tough decisions and Congress seems unwilling — at least so far — to make them.
PIA National has been pushing for reforms. The association wants:
• Congress to support legislative solutions to create sensible options for growing the private flood insurance market, promoting flood risk management policies, transitioning to risk-based rates and reforming the NFIP.
• The Federal Emergency Management Agency (FEMA) to support solutions for eliminating the NFIP's debt and putting the program on a path to fiscal stability.
Though an average hurricane season is predicted, one or two big ones hitting Florida or in the Gulf States, or if the one now bearing down on the Baja Peninsula — Hurricane Bud — grows in strength or changes course, then the NFIP could end up in even deeper trouble than it is in now.
Fitch Ratings issued its annual hurricane report and said though the government — via the FEMA and the NFIP — may not be all that prepared, insurers are ready for the season. Fitch said the aggregate policyholders’ surplus grew 7.5% in 2017 to a record $765 billion. With higher total investment returns, the elevated underwriting losses were offset so insurers find themselves ready.
Christopher Grimes of Fitch said, “Significant property losses in 2017 will lead to higher premium rates in loss-affected primary market segments. Market pricing data indicates that the soft market appears to have finally reached a bottom, with rate increases seen in most lines, particularly commercial property and property catastrophe reinsurance business.”
The National Oceanic and Atmosphere Administration (NOAA) has made a chilling prediction. It says to expect lots of high tide flooding in 2018. Tides may be as much as 60% higher this year compared to two decades ago.
El Nino is the reason.
William Sweet — a NOAA oceanographer — said this comes from a NOAA report titled 2017 State of U.S. High Tide Flooding and a 2018 Outlook. It says more than 25% of the coastal locations it measured last year tied or broke the individual record for high tide flood days.
“I think the underlying trend is quite clear. Due to sea level rise the national average trend in high tide flood frequency is now more than 50 percent higher than it was 20 years ago and 100 percent higher than it was 30 years ago,” he said.
He and other NOAA experts think 2018 will set new records.
The five cities seeing the most impact are:
• Boston, Massachusetts
• Atlantic City, New Jersey
• Sandy Hook, New Jersey
• Sabine Pass, Texas
• Galveston, Texas
The report said, “Already, high tide flooding that occurs from a combination of high astronomical tides, typical winter storms and episodic tropical storms has entered a sustained period of rapidly increasing trends within about two-thirds of the coastal U.S. locations. Though year‐to‐year and regional variability exist, the underlying trend is quite clear: due to sea level rise, the national average frequency of high tide flooding is double what it was 30 years ago.”
While Fitch says insurers may be prepared, the federal government may not be. Cities in Florida and Texas say they are still waiting for the Federal Emergency Management Agency (FEMA) — who runs the NFIP — to send the millions of dollars promised to take care of last year’s hurricane destruction.
Texas says over a third of the $695 million it expected has still not arrived. Florida’s story is worse. It has picked up 1% of the promised $83 million of emergency money from FEMA.
The downside is local governments have to use emergency funds, borrow money from other sources and cut spending to get things done. That — say experts — leave them more vulnerable to upcoming emergencies.
Once the president declares an area a disaster FEMA’s disaster grant program is supposed to pay local governments up to 75% of the cost of emergency services, the removal of debris and the repair or replacement of the infrastructure.
The program paid out $36 billion between 2009 and 2016.
That’s a lot of money and the scale of disasters these days is growing. FEMA — as we all know — is stretched thin. But auditors — like the Government Accounting Office (GAO) — say the problem is FEMA’s emergency distribution process. It is unwieldy with “a complex multi-step grant program” that has an “extensive paperwork and review process.”
Plus, the GAO says FEMA doesn’t have enough fully-trained workers.
Chris Currie runs FEMA’s office of emergency management and he says his staff is overworked. “Not everybody was trained and ready to go. Our concerns about the workforce being ready — they certainly haven’t gotten any better, because the workload is only going up."
FEMA’s Jenny Burke said the agency isn’t slow to deliver aid. She blames an unwarranted focus on the agency’s failings and no realization that this “does not reflect the true recovery process or progress that continues to be made following last year’s historic disasters.”
She blames state governments for the troubles and says once the money reaches the states, tribes or territories it is their responsibility to get the money distributed.
The states of Texas and Florida disagree that they’ve been slow to get the money to the hard hit communities.
Source links: Bloomberg, Business Insurance, Insurance Journal, PIA National