RAA endorses bipartisan legislation to discourage (re)development in flood-prone areas
As the severity and frequency of natural disasters continue to increase, the Reinsurance Association of America has endorsed the Build for Future Disasters Act, bipartisan legislation reintroduced by Representatives Andy Barr and Scott Peters to end the costly cycle of building, flooding, and rebuilding perpetuated by the National Flood Insurance Program (NFIP).
The Build for Future Disasters Act of 2021 would end NFIP subsidies for newly-constructed properties in areas vulnerable to flooding. Properties built in 2025 and thereafter would be subject to rates that reflect up-to-date flood risk information. These new constructions would not qualify for a subsidy, while structures built before 2025 in flood zones or re-mapped into flood zones would still be eligible for grandfathering subsidies.
The bill also requires the US Government Accountability Office to study the feasibility and implications of lowering all subsidies to a point that puts the NFIP on a path to stronger financial footing. Together, this would reduce taxpayer burden, stop growing government risk, and quash the implication the risk must be low if insurance is cheap.
The bill’s reintroduction comes shortly after the Federal Emergency Management Agency (FEMA) announced new plans to update the NFIP’s risk rating methodology. FEMA’s Risk Rating 2.0 would better reflect the real risk of flooding of properties with more advanced actuarial tools and catastrophe models.
In commenting on the legislation, Frank Nutter, president of the Reinsurance Association of America, said: “A guiding principle of the Federal government’s natural disaster policy should be to protect the American taxpayer by managing the nation’s escalating natural disaster risks, reducing those risks over the long-term, and promoting environmental stewardship.
“We applaud Representatives Barr and Peters for recognising that the vicious cycle of build-flood-rebuild is not in the best interests of the National Flood Insurance Program, nor the American taxpayers who are ultimately on the hook for the costs associated with the program.”
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