To Protect Homeowners and Taxpayers, Repair Federal Flood Insurance


Owners of flood-prone properties need insurance reform before their finances are ever left dry.

More than 400,000 homes in Illinois are at risk of flooding, and many homeowners rely on federal flood insurance if they want to rebuild after water damage or destruction to their property.

But the existing federal flood insurance program is insolvent to the tune of more than $20.5 billion, a figure that will rise as increasingly severe and frequent storms hit the state, even with a new Federal Emergency Management Agency program designed to distribute premiums more evenly. .

The annual costs of flooding across the country could increase by 26% by 2050. Without changes, the end game is pretty clear. At some point, the flood insurance program will collapse and homeowners will be on their own.

The Metropolitan Water Reclamation District purchases flood-prone properties each year to prevent the cycle of constant rebuilding and to restore natural habitat. But that only supports a few properties each year.

To make a big difference in Illinois and across the country, Congress should pay special attention to the National Flood Insurance Program Solvency and Family Protection Act of 2022, introduced by U.S. Representatives Sean Casten, D-Ill., and Earl Blumenauer, D-Ore., who Casten says has bipartisan support.

The bill would focus government efforts on buying properties that have been repeatedly damaged or destroyed by flooding and relocating residents elsewhere in the community. This way taxpayers don’t have to pay to repair or rebuild the same properties over and over again.

Taxpayers are also exposed to billions of dollars in additional liability because tens of thousands of homeowners with flood-prone properties and federally backed mortgage insurance do not carry flood insurance on their home, according to a federal study released earlier this year.

Flood insurance is difficult to obtain. Private insurance companies have never figured out how to set up a risk pool that can share expenses affordably. The government was unable to provide flood insurance without significant taxpayer subsidies.

That’s because “flooding is the only expense that isn’t rare or unpredictable,” Casten told us.

Even when it works, the national flood protection program can take years to navigate, and its co-payment provision can make rebuilding too costly for low-income homeowners. Relocating people quickly would make life easier for many of them.

Often people are reluctant to move after their homes have been destroyed by floods. They may like to live along a river. They may have developed a sentimental attachment to their home over the years.

But rebuilding in the same place over and over again, partly at taxpayer expense, is not sustainable. It is best to return land to nature, which can provide flood protection for an entire community.

After half a century, federal flood insurance has not proven to be actuarially sound. It’s time to sandbag against a flood of future losses.

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