Homeowners across the U.S. face a growing double threat: intensifying severe weather and rising uncertainty about the government’s ability to help recover from it. Flash floods continue to increase in frequency and intensity, particularly in coastal and low-lying regions. As the need for protection grows, the future of the National Flood Insurance Program (NFIP)—a vital safety net for millions—hangs in the balance.
The National Flood Insurance Program (NFIP) is a FEMA-managed program that provides $1.3 trillion in coverage to more than 4.7 million consumers, helping Americans recover when floodwaters recede.
APCIA has never shied away from pushing for reforms to FEMA. We have supported numerous efforts over the years to make FEMA more effective.
But talk of dismantling FEMA would put millions of Americans at risk who depend on the government’s flood program, the NFIP. This is not a matter of ideology or politics. It’s math.
The private sector and individual states cannot absorb a trillion dollars in additional flood risk coverage overnight. Replacing NFIP’s subsidized rates with actuarial pricing, including the private cost of capital, would make flood insurance unavailable or unaffordable for many, especially in communities where the family budgets of hardworking are already stretched to the breaking point.
Instead, FEMA’s essential disaster resiliency and mitigation initiatives, including the flood insurance program, should be saved and strengthened. This would not only protect millions of Americans, but it would also deliver on President Trump’s promise to implement reforms across the federal government that increase efficiency.
First, more homeowners need flood protection. With nearly half of flood losses occurring outside of designated flood zones, Americans are dangerously underinsured to cover the risks of the rising tides. This is not to say that the government needs to provide all this coverage. Just the opposite. The private sector is prepared to expand flood insurance coverage options but not in an artificial market, which is what we have now.
To fix this, NFIP needs to charge market rates reflective of the true costs of risks. FEMA’s new payment methodology – Risk Rating 2.0 – has been a step in the right direction over the past few years. But NFIP still subsidizes overbuilding and masks environmental risk costs by charging below market rates.
Private insurers are held to market standards and must price risk that accounts for capital, exposure, and solvency. It doesn’t have the luxury to ignore $38 billion in deficits, which the NFIP carries.
Finally, the NFIP needs a long-term reauthorization. Since the last one passed over a decade ago, the program has seen 33-short-term extensions with multiple lapses and reimbursement delays. This instability discourages private investment in flood insurance, even as demand continues to rise.
Private flood insurance has grown significantly to help meet some of the ongoing demand for coverage, but without clarity on NFIP’s future, insurers are reluctant to commit capital at scale. Greater certainty from Congress would enable a stronger public-private partnership that can address the increasing flood risk.
Frustration with FEMA is understandable. But the solution cannot be to dismantle programs that provide critical disaster recovery. Instead, we need this Administration and Congress to do what previous leaders could not: reform the program to ensure more people are protected, reduce subsidies, and provide long-term certainty that the private sector can build around and grow over time.
David Sampson is President and CEO of APCIA and former deputy secretary of Commerce.
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