“The National Flood Insurance Program (NFIP) run by the Federal Emergency Management Agency (FEMA) is $20.5 billion in the hole, even after Congress canceled $16 billion in debt in 2017. This financial shortfall is largely because the program does not charge nearly enough in premiums to pay for the flood damage on the properties it insures. For decades, taxpayer bailouts of the NFIP have enabled people to live and build in flood-prone areas instead of bearing the risks themselves.
In order to address this problem, the NFIP has been working on its new Risk Rating 2.0 initiative, with the aim of charging premiums that more accurately reflect the unique flooding risks of individual properties. The agency had planned to release its updated rates later this year.
Not so fast, says Senate Majority Leader Chuck Schumer (D–N.Y.). The senator’s office recently informed FEMA that adjusted premiums could have a “severe impact” on homeowners, and urged Congress and the Biden administration to work together toward “affordable protection” for flood-prone communities.”
“lots of beachfront dwellers in New York (and elsewhere) have been “unfairly” taking advantage of taxpayers. A recent study by the nonprofit research group First Street Foundation calculates that the average estimated annual loss for each of the 4.3 million properties most at risk of flooding is $4,419, whereas NFIP premiums average $981. In other words, their flood insurance premiums would have to increase 4.5 times over their current rates to fairly cover the flooding risks to these properties.”
“as a result of “direct government provision of subsidized insurance, private markets no longer generate price signals regarding the cost of living in severe-weather regions.” Suppressing the true cost of insurance encourages “private parties to (rationally) assume excessive risk, and dump the cost of living in the path of storms on others. Indeed, much of the development of storm-stricken coastal areas is due to insurance subsidies, and would likely not have happened at the same magnitude otherwise.””