US senators from both sides of the aisle are looking to fix the nation's flood insurance problem.

During a Jan. 25 hearing of the Senate Committee on Banking, Housing and Urban Affairs, senators expressed concerns surrounding the current state of the US flood insurance market, the large protection gap that exists and the unaffordability of premiums.

Flood insurance is not included in homeowners insurance policies but is instead offered through the National Flood Insurance Program (NFIP), which is managed by the Federal Emergency Management Agency (FEMA). The NFIP is a public-private partnership as flood coverage is sold and serviced by insurance companies.

"In short, our flood insurance system is not working right now," Sen. Elizabeth Warren (D-Mass.) said. "We should be making big bold investments to stop climate change in its tracks and to reduce the risk that floods pose to our communities."

Premium increases

Several senators criticized changes introduced by Risk Rating 2.0, which updated the NFIP's pricing approach and was fully implemented as of April 1, 2023.

On the NFIP website, FEMA says its current pricing approach allows the agency to "set rates that are fairer and more equitable" by equitably distributing premiums across consumers based on a home's value combined with the property's risk of flooding.

Some senators took issue with the latest update and said the new approach resulted in triple-digit premium increases in some areas.

Sen. John Kennedy (R-La.) said that in some parishes of Louisiana, premiums have increased up to 540% after Risk Rating 2.0 was implemented.

"FEMA lied, and they're not going to do any better," Kennedy said. "Right now FEMA can raise the premiums 18% every year because they don't care ... and they ought to hide their heads in a bag."

Most senators expressed concern about the unaffordability of flood insurance policies and the lack of education that often leads homeowners to believe that flood coverage is included with their homeowners insurance policies.

The bigger issue

Sen. Tim Scott (R-SC) said that although the point of the hearing was to talk about the NFIP and how to mitigate flood risk, there is a need for a "serious conversation" about a "comprehensive catastrophic occurrence approach."

When an insurer cannot calculate a probable maximum loss for an occurrence, that means that at some point it will not be insured, Scott said.

"You can't have an actuary sit at a table and figure it out," Scott said. "Without that comprehensive approach, we really are missing the target by a mile."

Scott added that a strategy should be in place to handle education in places where people do not think flooding is likely. Scott previously introduced the Repeatedly Flooded Communities Preparation Act, intended to provide resources for mitigating flood damage and "end the costly cycle of repeated flooding and rebuilding."

Warren said it is important to understand how climate change is impacting flood insurance markets and referenced an executive order that President Joe Biden issued in 2021, directing the Federal Insurance Office to examine the impact of climate change on insurance in the US. The Federal Insurance Office then proposed that data be collected from insurers to help the federal government understand climate-related risk, which has garnered opposition from the industry.

"We have to understand the problem in order to fix the problem," Warren said. "The Biden administration should finalize its data call about the effects of climate change on the insurance market as soon as possible."

State lines

Meanwhile Sen. Katie Britt (R-Ala.) emphasized her opposition to the data call, calling it "yet another blatant effort to overstep into the state regulated insurance industry" and describing it as a Biden administration effort to pursue its "climate agenda" at a cost to taxpayers.

Maintaining the current state-based regulatory system for insurers or allowing more federal intervention was discussed at a recent hearing examining issues in the property and casualty insurance industry, including rising rates and the restriction of coverage.

Senators also expressed dissatisfaction that the NFIP is constantly under threat of expiration. According to a report from the Congressional Research Service, nearly 30 short-term NFIP reauthorizations have been enacted since the end of fiscal year 2017.

The NFIP is authorized until Feb. 2, 2024, at which point it will lose the ability to provide new flood insurance contracts, and its power to borrow funds from the Treasury will be drastically reduced unless it is reauthorized or amended by Congress.

During the first half of the hearing, a group of protestors clad in bright pink filed into the back of the room and silently raised pink-painted hands in the air for several minutes. Several wore shirts reading "No $$$ for Israel" to protest the US government's support of the country amid the ongoing Israel-Hamas war.