Watchdog’s report urges Congress to take action on flood insurance

Almost 90% of U.S. properties facing high flood risk don’t have insurance to cover such a catastrophe, according to a government watchdog agency’s latest report. To address the problem, it’s calling upon Congress to confront large structural issues within the insurance industry to try and close the coverage gap.     

Officials from the U.S. Government Accountability Office spoke alongside flood insurance reform groups in a virtual meeting Thursday afternoon to discuss findings from its report, published Oct. 1. Its recommendations to Congress include increasing coverage limits under the National Flood Insurance Program, which the Federal Emergency Management Agency administers. 

NFIP coverage is available to property owners who can’t obtain policies elsewhere, though the increasing frequency of major floods has stretched the program’s capacity to cover damages. Congress has taken a kick-the-can approach in recent years, extending the program several times since 2017 for short stints while failing to come up with a permanent solvency solution. 

The NFIP’s current temporary reauthorization is set to expire Dec. 11, when it’s likely Republicans who are expected to lose control of at least one chamber in next week’s election would have to push through another extension.  

“It soon became clear that many of the program’s challenges were structural and required congressional action to fix,” GAO senior analyst Nathan Gottfried said about the analysis. 

Flood insurance is required by law on properties in zones that FEMA designates as a high flood risk. Mortgages backed through the federal government also must have the coverage, and most private lenders follow the same standard when a property is flood prone.

Louisiana has the highest rate of flood insurance policyholders, with 28% of properties covered where required. Despite this, data show there are still areas widely underinsured compared to their risk.

The GAO report recommends Congress require lenders offering federally backed mortgages to ensure homebuyers obtain a flood insurance quote before they purchase a home. Buyers would also have to sign documents that detail their flood risk. 

The report also suggests increasing NFIP coverage limits and adding a way for the program to adjust them periodically. Damage claim limits for single-family homes are $250,000 for the structure and $100,000 for contents under program policies.

The report also urges Congress to force FEMA to make flood risk information for individual properties available to the public. Gottfried said his office came up with this recommendation after interviews revealed property owners, insurance agents, real estate agents and lenders don’t have easy access to this data. 

“When consumers are more aware of this risk, they are more likely to purchase the coverage,” Gottfried said. 

FEMA sets premium rates for the National Flood Insurance Program, which private insurers often use as a benchmark for determining what they will charge policyholders. Officials in flood-prone regions have pushed for the NFIP to lower premiums, with hopes it would bring overall insurance prices down. 

FEMA’s Risk Rating 2.0 tool, put in place under the Biden administration, doesn’t accurately reflect infrastructure upgrades and other steps taken to reduce flood threats, according to critics who argue the agency isn’t transparent with how it comes up with its numbers.

Louisiana is the lead plaintiff in a lawsuit that then Attorney General Jeff Landry filed against the federal government in 2023 to block Risk Rating 2.0. The Trump administration has defended its use as part of its overall emphasis on shifting the federal government’s burden for disaster recovery onto states. In July, the Department of Justice filed a motion to dismiss the case, which remains active.