A number of US senators expressed concern during a hearing held by the Senate Committee on Banking, Housing and Urban Affairs that cuts being made to the Federal Emergency Management Agency's funding will ultimately increase property insurance costs.
During a May 1 hearing titled "Examining Insurance Markets and the Role of Mitigation Policies," senators discussed the rising lack of affordability and availability of property insurance across the US and what Congress can do to help keep costs down for consumers.
Senators from both sides of the aisle agreed that disaster mitigation and resilience efforts are an important part of being able to lower post-disaster costs, although there is some disagreement about which level of government should ultimately be responsible for picking up the bill on catastrophe mitigation.
"Mitigation saves lives, it preserves property and ultimately leads to more stable markets and healthier communities," Sen. Tim Scott (R-SC) said. "I believe that a serious and thoughtful approach to mitigation combined with insurance market reforms that allow carriers to tie real risks to rates can help ensure that coverage remains available and affordable for Americans across this remarkable country."
Changes to FEMA
FEMA has faced major criticism from Republicans and President Donald Trump, who claim the agency is wrapped up in bureaucracy and is slow in its disaster response. Trump has also said that FEMA spent all its money to help immigrants who are in the country illegally, while Homeland Security Secretary Kristi Noem said in a March 24 televised cabinet meeting that she planned to "eliminate" FEMA.
Trump signed an executive order on March 19 that began the overhaul of the agency, ordering a review of FEMA policies and directing Noem to propose changes that would "ensure state and local governments and individuals have improved communications with federal officials," as well as a "better understanding of the federal role."
"Federal policy must rightly recognize that preparedness is most effectively owned and managed at the state, local, and even individual levels, supported by a competent, accessible, and efficient federal government," the order read. "When states are empowered to make smart infrastructure choices, taxpayers benefit."
FEMA also announced April 4 that it was ending its Building Resilient Infrastructure and Communities (BRIC) program. Any BRIC applications from the fiscal years 2020 through 2023 were also canceled. A spokesperson for FEMA called BRIC a "wasteful and ineffective FEMA program," claiming that it was focused on "political agendas" over aiding citizens impacted by disaster.
FEMA's impact
Robert Gordon, who is senior vice president of Policy, Research and International for the American Property Casualty Insurance Association, spoke as a panelist during the hearing and pushed back on the idea that FEMA's role can be filled by other entities.
"FEMA plays an essential role in disaster mitigation, preventing losses before they occur, and the USDA supports community resilience in forest management that are very important," Gordon said. "Those programs are essential for effective mitigation and cannot be easily replicated by the states or private industry."
Gordon said homeowners insurers paid out $1.11 in claims and expenses for every $1 collected in 2023, citing the National Association of Insurance Commissioner's latest profitability study released in April.
"Homeowners insurance rates increased because homeowners losses increased even more," Gordon said. "The primary cost factors were record inflation, even higher inflation for building materials, and more expensive buildings being built in disaster prone areas."
Ranking Committee Member Sen. Elizabeth Warren (D-MA) used her remarks to accuse Trump of "making the property insurance crisis worse," especially with his imposition of "chaotic and damaging" tariffs.
"These tariffs will make just about everything needed to rebuild and repair houses more expensive," Warren said.
Fate of the NFIP
The movement to overhaul FEMA has also raised questions about the fate of the National Flood Insurance Program, which is a federally backed flood program administered by the agency and delivered to the public through partner insurance carriers. The NFIP is billions of dollars in debt to the US Treasury and requires frequent congressional reauthorization to operate.
The Heritage Foundation, a conservative think tank based in Washington, DC, near the US Capitol, suggested in its Project 2025 handbook that the NFIP should be "wound down and replaced with private insurance starting with the least risky areas currently identified by the program."
In response to a senator's question, Gordon said that the private sector is not equipped to absorb the costs related to the NFIP and keep insurance premiums low for consumers if the NFIP were entirely privatized and eliminated. Gordon noted that the NFIP "underprices" its coverage and is $22 billion in debt even after $16 billion of debt forgiveness.
"There's such a great chasm between that and what the private market would have to charge, the private market just wouldn't be able to do it," Gordon said. "It would be political outrage; the private market would take a long time to absorb that."
Gordon also added that the NFIP's role in encouraging floodplain management, development of flood maps, and building codes is irreplaceable.
"It's essential to keep that program working," Gordon said. "We've certainly raised our hand anytime there were hiccups in the Write-Your-Own (WYO) program to make sure that American homeowners can continue to benefit from the federal flood insurance program."
The majority of flood policies are written under the WYO program, which simply allows participating insurers to issue NFIP flood policies that are 100% reinsured by the federal program, instead of the NFIP directly issuing a policy.
