There are, in short, scads of meaty issues that need tackling. And plenty of congressional lawmakers from both teams are itching to do so, including Jeb Hensarling, chairman of the House Financial Services Committee, which is responsible for reauthorizing NFIP. Hensarling’s committee has been laboring to come up with a comprehensive reform package that touches on many of the aforementioned problems but still has a prayer of passage. Despite the bipartisan nature of NFIP, the regional politics involved make significant change next to impossible.
Unsurprisingly, NFIP policyholders tend to get super grumpy in the face of anything that could raise their rates. And grumpy property owners translate to twitchy legislators. As such, this political battle tends to break down along geographic rather than party lines, with lawmakers from coastal and other NFIP-heavy areas often laser-focused on rate affordability above all.
Case in point: In 2012, Congress passed the Biggert-Waters Insurance Reform Act, which sought to phase out subsidies and make other adjustments to NFIP. (One of the most controversial provisions mandated that when a rate-subsidized property was sold, its premiums would promptly rise to the full-risk level. This went over very poorly with property owners and realtors.) The pace of change proved too aggressive. Rates started rising, people started freaking out, and, less than three years later, Congress passed a bill delaying or reversing many of the changes.
With reauthorization time here again, lawmakers are looking to give it another go—though they’re treading much more carefully. People involved in the effort say the lesson of Biggert-Waters is that lawmakers must move in baby steps to avoid giving policyholders sticker shock. Boost the private market a smidge here. Bump up surcharges a hair there. Work to better track repetitive-loss properties. Encourage mitigation ever so gently.
But even those efforts may prove untenable. The current legislative situation, Hill folks admit, is a mess. “The general agreement is that people don’t like what they have but are unwilling to make changes,” a frustrated Financial Services staffer noted to me.
In June, Hensarling’s committee cleared seven bills that in theory will be packaged into one 21st Century Flood Reform Act for the House to vote on. But already the chipping-away has begun. In late July, two dozen or so Republicans sent a letter to Speaker Paul Ryan saying they could not support the package because of affordability concerns. (Some Democrats have similar reservations.) Homebuilders and realtors associations were also up in arms. Hensarling’s people placated the latter groups by agreeing to dial back proposed fee and rate increases and retain the practice of grandfathering.
Still, grumbling among members continues, and the Senate seems to be coalescing around a far more modest bill. Reform advocates admit they are not optimistic that much will get fixed this time around. And so the dysfunctionality grinds on, even as the thunderheads roll in and the water levels rise.
Just something to think about while watching all those Weather Channel reporters getting whipped around stormy beaches this season.