Today, Congresswoman Maxine Waters (D-CA), Ranking Member of the Committee on Financial Services, issued a statement regarding the devastation caused by hurricanes this season, and the news that Congress will need to raise the National Flood Insurance Program’s (NFIP) borrowing authority to pay all of its claims from Hurricanes Harvey and Irma.
“As the 2017 hurricane season continues, we must put these storms and their impact on our fellow Americans into perspective. Irma made history with winds at some of the highest levels ever recorded and the longest consecutive streak as a Category 5 hurricane, and while the storm hit a week ago, there are still hundreds of thousands in Florida without power or dealing with the effects of flooding. But Irma is the second catastrophic storm to hit the U.S. in just a matter of weeks. Houston, Beaumont, and other cities are still struggling to clean up in the wake of Hurricane Harvey. And with Hurricane Maria now threatening the U.S. Virgin Islands and Puerto Rico, the nation must brace for another storm and another long recovery. As a nation, we must get serious about the reality that climate change will likely make these storms more frequent, stronger and more devastating than ever before. And we must make sure that the National Flood Insurance Program (NFIP) remains available and affordable to all Americans.
“If Congress does not raise the NFIP’s borrowing authority it will be unable to pay all flood insurance claims from Hurricanes Harvey and Irma. Rather than continue this unsustainable cycle, I reiterate my call for Congress to forgive the NFIP’s current $24.6 billion debt. When Congress inevitably does the right thing and provides the NFIP with the additional billions of dollars it will need to make policyholders whole from these two catastrophic storms, policyholders will be left on the hook for nearly $1 billion annually in interest alone. This is an absurd amount of money that the government is paying to lend itself money, and it is unfair to burden policyholders who pay their premiums responsibly with that cost.
“It is long overdue for Congress to deal with the NFIP’s debt for the long-term by moving to wipe the slate clean, replace the current structure with a mechanism to exclude the most catastrophic risk from premium rates, and set aside funds to pay for those additional costs. Continuing to increase premiums so that all of the policies match ‘full risk rates’ would have done nothing to change the final outcome resulting from Harvey and Irma – by all accounts, full risk rates would have brought in only a fraction of what these two storms cost.
“As Ranking Member of the Committee on Financial Services, I pledge to do everything in my power to reauthorize the NFIP in a responsible way that ensures the continued availability and affordability of flood insurance, make sure that the banks and housing entities are doing everything possible to provide relief to victims, including by advancing legislation where necessary, and push for robust funding for families and communities to pick up the pieces and rebuild.”
The National Flood Insurance Program has been self-supporting for most of its nearly 50-year history. However, in order to ensure that the NFIP can pay all of its claims following catastrophic losses, FEMA has the authority to borrow funds from the U.S. Treasury. Prior to Hurricane Katrina in 2005, the NFIP had generally been able to cover its costs, borrowing relatively small amounts from the U.S. Treasury to pay claims, and then repaying the loans with interest. However, due to extraordinary losses incurred following hurricanes Katrina, Rita and Wilma in 2005, the NFIP had to borrow $19 billion that – for the first time – it could not repay. Excluding the debt from the 2005 storms, the NFIP was self-funded again from 2006 until October 2012. Following Superstorm Sandy in 2012, Congress authorized FEMA to borrow up to an additional $7 billion, bringing its total authority to $30.425 billion. Prior to Hurricane Harvey, NFIP’s debt stood at $24.6 billion, leaving $5.825 billion left without further Congressional action. These funds are expected to be exhausted following Hurricane Harvey, requiring Congress to increase the borrowing authority in order for the NFIP to pay all of its claims following Hurricanes Harvey and Irma.