Hurricane Milton Sparks Concerns Over Flood Insurance Program

_{Source – politico.com}

Storm Threatens NFIP Funding

Hurricane Milton, a powerful storm expected to hit western Florida on Wednesday night, is raising alarm bells about the financial stability of the National Flood Insurance Program (NFIP). As Congress prepares for potential fallout, key lawmakers and aides are assessing the storm’s implications for a program already burdened by significant debt.

Financial Implications of Recent Storms

With claims from Milton and last month’s Hurricane Helene looming large, there are growing concerns that the NFIP could soon exhaust its nearly $5 billion in available funds. Estimates suggest that the storm may force the program to utilize its $9.9 billion borrowing authority from the Treasury. Despite collecting premiums and paying out claims like any typical flood insurance provider, the National Flood Insurance Program has faced ongoing financial struggles due to decades of flawed flood risk assessments and heavy losses from catastrophic events, including Hurricane Katrina.

Political Tensions Emerge

Lawmakers are beginning to speculate on the storm’s potential to push the NFIP to its borrowing limits. This could trigger contentious discussions about raising the program’s borrowing cap or exploring alternative funding mechanisms to ensure policyholders receive the payments they are owed. Nearly 2 million NFIP policies are in areas impacted by Hurricane Helene or at risk from Milton, which has fluctuated between Category 4 and Category 5 status this week. Florida alone is home to over 1.7 million NFIP policies.

One House Financial Services Committee staff member expressed concern that even a $15 billion cap might not be sufficient to cover the combined damages from Helene and a Category 5 storm hitting Tampa.

Long-Standing Legislative Challenges

The impending crisis is likely to reignite long-standing political disputes surrounding the NFIP. Congress has struggled for years with potential reforms, grappling with the delicate balance between improving the program and avoiding significant cost increases for homeowners. Discussions about emergency measures to ensure claims are paid post-Milton are expected to be contentious. Proposals may include raising the NFIP’s borrowing authority, appropriating funds for claims, or forgiving some of the NFIP’s existing debt, as was done after a series of hurricanes in 2017.

Rep. Garret Graves, a Republican from Louisiana, highlighted the challenges of reaching a consensus on disaster preparedness and recovery. He emphasized that the current approach is inefficient and ultimately re-victimizes disaster victims.

Divergent Views Among Lawmakers

Graves recently discussed the situation with House Financial Services Chair Patrick McHenry, who expressed frustration about the complexities within the flood insurance landscape. There are notable divisions among lawmakers, with McHenry favoring increased borrowing authority or additional appropriations while Rep. Maxine Waters, the leading Democratic member of the committee, has long supported debt forgiveness. Currently, Congress has imposed a $30.4 billion borrowing limit on the NFIP.

Lisa Peto, a former chief counsel on NFIP matters, anticipates that borrowing authority will be raised, although the political appetite for debt forgiveness remains uncertain. Concerns about fairness from lawmakers representing less flood-prone areas may complicate discussions around cross-subsidization in flood insurance.

Commitment to Policyholders

As pressures mount on the NFIP and FEMA from both Hurricane Helene and Milton, lawmakers are emphasizing the need to ensure that policyholders receive the funds they are entitled to. Sen. Mike Rounds, a Republican from South Dakota and a member of Senate Banking reassured that efforts would be made to avoid delays in FEMA’s response to the needs of those affected by the storms. He acknowledged the potential for increased debt within a program that is in dire need of reform but noted that this approach has been consistent with past practices.

Future Outlook

Although Congress will not reconvene until after the November elections, there is a window of opportunity to address any financial shortfalls within the NFIP. Former NFIP chief actuary Andy Neal suggested that the combined claims from Helene and Milton could exceed the program’s borrowing authority, but the $9.9 billion cushion offers a crucial buffer that allows time for legislative action.

As the nation braces for the storm’s impact, the fate of the NFIP hangs in the balance, underscoring the urgent need for reform and a sustainable funding strategy.