Homeowners may be left without flood insurance

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The oceans are rising, storms are getting stronger, and periods of torrential rainfall are becoming more frequent. Having good flood insurance is more important than ever, but the National Flood Insurance Program (NFIP) will expire at the end of the month, leaving Rhode Islanders in the lurch with no way to sell or protect their homes. 

“Right now anyone who lives in a flood zone requires flood insurance to get a mortgage, and if the insurance falls through, you won’t be able to buy or sell a house,” said Joe Luca, the president of the Rhode Island Association of Realtors. “It’s not just millionaires who live in big fancy houses on the coast, it’s (impacting) regular working class Rhode Islanders who live in a flood zone.”

Luca said that 40,000 real estate closings a month will be affected if NFIP falls through, as homeowners won’t be able to get the flood insurance that the terms of their mortgage requires.

If the program is not renewed by July 30, homeowners who currently have flood insurance will still be covered for the duration of their policy, usually one year, and any claims they make will be paid out thorough remaining NFIP funds, but according to the NFIP website, once the program expires homeowners will not be able to renew their flood insurance or acquire a new policy. As the only flood insurer is the government, if the government program shutters there won’t be any way to get flood insurance at all.

NFIP was founded in 1968 through the National Flood Insurance Act of 1968. Before NFIP flood insurance had been a part of homeowners insurance, but after increasing claims, private insurers decided to exclude flood insurance from the homeowners package. Soon even separate flood insurance became too expensive for private insurers to cover, and so the federal government stepped in during 1968. 

Since then the program has gone through a number of changes, but in the current iteration the federal government is the only insurer, with private insurers cut out of the market completely. Flood insurance is mandatory before a mortgage can be acquired for a home in a flood zone. 

As of May more than five million homes were insured nationwide through NFIP, with 13,000 of them in Rhode Island. 

In Warwick some of the areas susceptible to floods are near the Pawtuxet River, Warwick Neck, Oakland Beach, and Conimicut according to the flood maps done by the Federal Emergency Management Agency, FEMA. In Warwick there are 1,443 homes with flood insurance, insuring more than $320 million in property value.  

NFIP is set to expire July 30, unless Congress extends the program, something it’s done six times since last September. A number of different bills are before Congress to reauthorize and reform the program, but with the current level of political polarization, an extension is no sure thing.  

According to a statement from Senator Jack Reed’s office “Congress needs to work together to provide a comprehensive, long-term reauthorization that will ensure property owners know their flood risk and have an appropriately priced but affordable way to insure against it, as well as options and incentives to mitigate their risk.”

Reed has endorsed a number of different legislative initiatives while trying to revamp NFIP. He introduced a bipartisan bill, the State Flood Mitigation Revolving Fund Act of 2017, which would give FEMA the power to grant revolving loans to states to help mitigate flood insurance and risk. He’s sponsored other bills that either seek to extend the program or reform it. 

But there’s still concern that no bill will be passed and homeowners will be left high and dry. Because of the current NFIP stipulation that a home needs flood insurance before a buyer can get a mortgage, if NFIP lapses then thousands of home sellers won’t be able to find buyers. 

According to the statement from Reed’s office, “Senator Reed hopes work on at least one of these measures, with a simple extension of the flood insurance program, can be completed before the end of the month or that a free-standing flood insurance extension can be adopted.”

Other Rhode Island legislators also understand the pressures and importance of NFIP. 

“We need to find a path forward that does not overburden homeowners, puts the federal flood insurance program on solid financial ground, implements rates that reflect more accurate flood mapping, and accurately predicts emerging hazards like sea level rise,” said Senator Sheldon Whitehouse. 

“We need to make sure the program works for everyone, not just millionaires and billionaires,” said Rep. David Cicilline. “I’ve opposed flood insurance bills that Republicans wrote on their own because they increased premium costs for middle class policyholders.”

“The congressman understands the needs of the flood program and understands that it’s important to Rhode Island,” said Stuart Malec, Rep. Jim Langevin’s press secretary. 

A longer-term solution to fix NFIP is unclear. NFIP is under such a mountain of debt due to claims tied to Hurricanes Maria, Irma, and Harvey, that last October Congress had to pass a bill to forgive $16 billion in deficits that the program had accumulated.  

Currently premiums are too low to cover flood claims, and with another hurricane season coming it’s unclear as to how much longer the program can stay afloat, even if it’s extended past July 30. 

For some the problem lies in the maps used by FEMA to define areas in flood zones. 

“We would like Congress to not only reauthorize the program but to revamp, and update the maps,” said Luca. “They need to get good data.”

For others, the key is to open the market to private insurers, allowing the free-market to play a role in reducing costs. 

But for now homeowners are left waiting, unclear for what the future holds.

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