Menendez Pushes for Flood Insurance Reforms during Banking Hearing

Senator stresses need for greater affordability, investment in mitigation, reforms to broken claims process

WASHINGTON, D.C. – U.S. Senator Bob Menendez, chair of the Sandy Task Force and the leading voice in Congress for sweeping reform to the National Flood Insurance Program (NFIP), today pressed expert witnesses during a Banking Committee hearing on the need to make the program more affordable, to revamp a broken claims process that left many Superstorm Sandy survivors holding the bag, and to invest more in mitigation efforts to reduce risk and the ultimate cost to rebuild after a flood.  The NFIP expires in September if Congress fails to act.

“We need to put an end to the short term extensions of the NFIP and finally pass a long term reauthorization of this program.  Any NFIP authorization bill needs to keep premiums affordable, invest in robust mitigation, and fix the claims process that left so many New Jerseyans out of their homes for years after Hurricane Sandy,” said Sen. Menendez.  “Unfortunately, what I’ve heard from some of the witnesses today concerns me and runs counterintuitive to the whole purpose of the NFIP.  The great solution, as some say to the problems of the NFIP, is to raise premiums.  That makes the most vulnerable to flooding pay extremely high premiums for their coverage.  The reality is, the more you put onto the back of the policyholder, the more people leave the program altogether.  Ultimately, this idea is worse off for taxpayers, forcing Congress to spend more on expensive disaster relief that goes to unprotected homes.”

Sen. Menendez questioned the lack of transparency with the Federal Emergency Management Agency’s (FEMA) new effort to assess flood risk, called Risk Rating 2.0, and raised concerns that it will lead to skyrocketing premiums for many homeowners across New Jersey and the nation.  The Senator called for a nine percent cap on annual flood insurance premium hikes to guard against potential rate shock.

“At the end of the day, we want people to recover, we want them to be able to rebound after an event.  And so, ensuring affordability mean people will take up coverage.  It means that homeowners who maybe aren’t required to have [flood] insurance coverage will adopt policies, will subscribe [to the NFIP].  It broadens the pool of risk.  It lowers the risk for everyone.  It lowers the risk to the program overall,” said Rebecca Kagan Sternhell, director of the New York City Office of Federal Affairs.  “That’s been some of our concern with Risk Rating 2.0 that it’s been done in black box and we don’t know where the impacts will be, whether they’re localized or widespread, in specific communities.  And so, ensuring affordability is the number one challenge facing you all right now as you work to reauthorize this program.”

Sen. Menendez noted that every $1 invested in mitigation efforts saves the NFIP $6 in costs on the backend after a flood. 

“Mitigation becomes very important, whether you elevate, whether you relocate, whether you buyout, and do those kinds of things.  You truly can make those families and those business much more resilient to flooding in the future and have the benefit of a lower flood insurance rate,” said Chad Berginnis, executive director of the Association of State Floodplain Managers.

Sen. Menendez called for reining in “runaway expenses” at the NFIP, capping compensation for private write-your-own (WYO) insurance companies participating in the program, and eliminating hundreds of millions in interest payments the federal government pays itself to keep the program solvent.

The Senator is currently working towards introducing new, bipartisan NFIP reform legislation built upon legislation he led in the last Congress with Sen. Bill Cassidy (R-La.).  The National Flood Insurance Program Reauthorization and Reform (NFIP Re) Act of 2019 tackles systemic problems with flood insurance, puts it back on solid fiscal ground, and reframes the nation’s entire disaster paradigm to one that focuses more on prevention and mitigation to spare the high cost of rebuilding after flood disasters.

Sen. Menendez first exposed the problem of widespread lowballing of flood insurance claims during Congressional hearings he chaired in 2014, and then successfully pushed FEMA to reopen every Sandy flood insurance claim for review, which compensated Sandy victims with more than $260 million in additional payments they were initially denied.

Sen. Menendez authored the Superstorm Sandy Relief and Disaster Loan Program Improvement Act, which extended and expanded access to federal disaster loans through the U.S. Small Business Administration (SBA).  His Homeowner’s Flood Insurance Affordability Act was signed into law in 2014 to address skyrocketing rates many Sandy survivors were encountering.  In 2013, he shepherded the original $60 billion federal Sandy aid package through Congress.