The State of the NFIP and flood The State of the NFIP and flood policies – A system of risk policies – A system of risk

management - Is it Time for a management - Is it Time for a Change?Change?

David R. ConradDavid R. ConradSr. Water ResourcesSr. Water Resources

SpecialistSpecialistNational Wildlife National Wildlife

FederationFederationABA 34ABA 34thth Annual Annual Spring Conference Spring Conference

on the Environment on the Environment Baltimore, MDBaltimore, MDJune 9, 2006June 9, 2006

““Higher Ground”Higher Ground”

Great Mississippi Flood of 1993Great Mississippi Flood of 1993 1000 levees broke; 60-80,000 buildings flooded1000 levees broke; 60-80,000 buildings flooded

Hazard Mitigation Grants Program- focus on buyouts Hazard Mitigation Grants Program- focus on buyouts and relocations – Dec 1993 - New approachesand relocations – Dec 1993 - New approaches

““Sharing the Challenge”- July 1994Sharing the Challenge”- July 1994 Major recommendations for improving floodplain programsMajor recommendations for improving floodplain programs

Flood Insurance Reform Act 1994Flood Insurance Reform Act 1994 Heard about ‘Repetitive losses’: less than 2% of properties Heard about ‘Repetitive losses’: less than 2% of properties

generate 40% of NFIP lossesgenerate 40% of NFIP losses ““Higher Ground”- released July 1998Higher Ground”- released July 1998

Two year studyTwo year study

Hazard Mitigation Grants Hazard Mitigation Grants ProgramProgram

Major Findings of “Higher Major Findings of “Higher Ground”Ground”

Less than 2% of properties were generating nearly 40% of NFIP Less than 2% of properties were generating nearly 40% of NFIP losses. Many were highly subsidized pre-FIRM properties.losses. Many were highly subsidized pre-FIRM properties.

10% of Single Family Homes Had Repetitive Losses Exceeding 10% of Single Family Homes Had Repetitive Losses Exceeding Their Value.Their Value. For 5,629 homes, or almost 10 percent of the single family homes with For 5,629 homes, or almost 10 percent of the single family homes with

repetitive losses, the cumulative flood insurance payments exceed the repetitive losses, the cumulative flood insurance payments exceed the home’s value. In all, these homes were valued at $308 million, but home’s value. In all, these homes were valued at $308 million, but received $416 million in insurance paymentsreceived $416 million in insurance payments

Substantial Damage Rules Are Poorly Enforced.Substantial Damage Rules Are Poorly Enforced. 15% (10,921) were “substantially damaged”. In all, 5,578 properties 15% (10,921) were “substantially damaged”. In all, 5,578 properties

received $167 million in insurance payments after suffering a 50 received $167 million in insurance payments after suffering a 50 percent or greater loss in one flood.percent or greater loss in one flood.

20% of Repetitive Losses Occur Outside the Designated 100-Year 20% of Repetitive Losses Occur Outside the Designated 100-Year FloodplainFloodplain In all, 15,275 repetitive loss properties outside the designated 100-year In all, 15,275 repetitive loss properties outside the designated 100-year

floodplain received $530 million in insurance payments.floodplain received $530 million in insurance payments. Called into deep question the reliability of NFIP maps.Called into deep question the reliability of NFIP maps.

Major FindingsMajor FindingsFlood Damages

(constant dollars)

$0.00

$5.00

$10.00

$15.00

$20.00

$25.00

Year

Dam

ages

($

bil

lio

ns)

1 2 3 4 5 6

1990s

1980s

1970s

1960s

1950s

1940s

1930s

1920s

1910s

BILLIONS (adjusted to 1999 dollars)

MajorMajor FindingsFindings: : Trends in Flood Trends in Flood DamagesDamages

$6 billion annually$6 billion annually Four-fold increase Four-fold increase

from early 1900sfrom early 1900s Per Capita Per Capita

Damages increased Damages increased by more than a by more than a factor of 2.5 in the factor of 2.5 in the previous century in previous century in real dollar termsreal dollar terms

$$2.2

$$2.0

$$2.9

$$2.4

$$3.4

$$2.2

$$4.9

$$3.3

$$5.6

Major Findings: NFIP barely Major Findings: NFIP barely keeping ahead of costskeeping ahead of costs

1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

Flood Insurance Program Income & ExpensesFiscal Years 1977 - 1997

Income Expenses

Major FindingsMajor Findings

Frequency Distribution of Frequency Distribution of Repetitive Losses Per PropertyRepetitive Losses Per Property

Repetitive Loss PaymentsRepetitive Loss Payments PropertiesProperties Losses Losses

$17,305,128 $17,305,128 2727 16-34 16-34

$8,120,317 $8,120,317 3434 14-15 14-15

$12,400,392 $12,400,392 6060 12-13 12-13

$27,008,567 $27,008,567 170170 10-11 10-11

$58,330,698 $58,330,698 534534 8-9 8-9

$163,466,160 $163,466,160 1,9831,983 6-7 6-7

$505,093,263 $505,093,263 8,8988,898 4-5 4-5

$576,609,898 $576,609,898 15,71115,711 3 3

$1,212,925,826 $1,212,925,826 47,07847,078 2 2

TOTALSTOTALS (as of Aug 1995) (as of Aug 1995)

$2,581,260,251 $2,581,260,251 74,50174,501 200,182 200,182 TOTALSTOTALS (3/31/2006 Post- Katrina) (3/31/2006 Post- Katrina)

$7,604,368,799 $7,604,368,799 122,569122,569 344,941 344,941

Repetitive Loss State Data as Repetitive Loss State Data as of 03/31/2006of 03/31/2006

State $ Losses TotalRepetitive Loss

Buildings TotalLouisiana 1,939,463,238.49 24937

Florida 1,143,743,755.37 15074

Texas 1,034,170,588.27 15209

Mississippi 438,047,861.37 4877

Alabama 409,219,509.66 4320

New Jersey 324,914,491.61 6969

Pennsylvania 319,463,014.09 5492

North Carolina 317,352,445.33 6483

New York 219,184,884.17 7355

Missouri 193,415,526.77 3980

California 156,521,484.01 2953

Virginia 123,776,392.06 2142

West Virginia 103,839,738.15 2577

Massachusetts 93,652,810.12 2260

South Carolina 71,794,314.27 1303

Number of Major (Category 3, 4, 5) Number of Major (Category 3, 4, 5) Hurricanes Striking the US by DecadeHurricanes Striking the US by Decade

4

6

65

4

6

88

5

8

6

9

1900s 1910s 1920s 1930s 1940s 1950s 1960s 1970s 1980s 1990s 2000s

*Figure for 2000s is extrapolated based on data for 2000-2005 (6 major storms: Charley, Ivan, Jeanne (2004) & Katrina, Rita, Wilma (2005)).Source: Tillinghast from National Hurricane Center: http://www.nhc.noaa.gov/pastint.shtm.

10

1930s – mid-1960s:

Period of Intense Tropical Cyclone Activity

Mid-1990s – 2030s?

New Period of Intense Tropical Cyclone Activity

Tropical cyclone activity in the mid-1990s entered the active

phase of the “multi-decadal signal” that could last into the 2030s

Already as many major storms in

2000-2005 as in all of the 1990s

FindingsFindings

Age of Effective Map Panels

21%

16%

30%

33% <5 years old5-10 years old10-15 years old>15 years old

ResultsResults

After 6 years and three Congresses- After 6 years and three Congresses- Bereuter, Blumenauer, Bunning Flood Bereuter, Blumenauer, Bunning Flood Insurance Reform Act of 2004 was Insurance Reform Act of 2004 was passedpassed Included targeted funding for non-Included targeted funding for non-

structural mitigation of repetitive loss structural mitigation of repetitive loss propertiesproperties

$90 million annually authorized$90 million annually authorized

But...But... When Katrina hit, FEMA had not completed When Katrina hit, FEMA had not completed

regulations to begin work on the special regulations to begin work on the special repetitive loss mitigation program...$90 million repetitive loss mitigation program...$90 million appropriated for FY2006 is not being spent appropriated for FY2006 is not being spent

FEMA Map Modernization program- 2001 FEMA Map Modernization program- 2001 initiative to update and digitize FEMA’s maps.initiative to update and digitize FEMA’s maps. Administration pledged $200,000,000 annually for Administration pledged $200,000,000 annually for

four years...ultimate costs may rise to $5 billionfour years...ultimate costs may rise to $5 billion

Due to budget cuts, HMGP is only 7.5% instead Due to budget cuts, HMGP is only 7.5% instead of 15% at a time when the funds will of 15% at a time when the funds will desperately be needed for Katrina recoverydesperately be needed for Katrina recovery

Katrina has changed the Katrina has changed the landscapelandscape

After Katrina, Rita After Katrina, Rita and Wilma, NFIP is and Wilma, NFIP is $23.5 billion in debt $23.5 billion in debt to the U.S. Treasuryto the U.S. Treasury

Interest payments Interest payments on debt will cost $1 on debt will cost $1 billion annually- half billion annually- half of all NFIP revenuesof all NFIP revenues

Katrina has changed the Katrina has changed the landscapelandscape

Without a bailout Without a bailout NFIP will collapseNFIP will collapse

Assume some Assume some bailout will be bailout will be provided, but the provided, but the program needs program needs much sounder much sounder footing in the futurefooting in the future

National Flood Insurance National Flood Insurance ReformsReforms

House Financial Services CommitteeHouse Financial Services Committee H.R. 4973, Flood Insurance Reform and H.R. 4973, Flood Insurance Reform and

Modernization Act of 2006, Reported March 16, 2006Modernization Act of 2006, Reported March 16, 2006 Raise Treasury borrowing from $18.5 b to $25 bRaise Treasury borrowing from $18.5 b to $25 b Phase-in actuarial rates for pre-FIRM vacation homes, Phase-in actuarial rates for pre-FIRM vacation homes,

non-primary residences, and commercial properties non-primary residences, and commercial properties over 7 yearsover 7 years

GAO study of extending mandatory purchase to GAO study of extending mandatory purchase to natural 100-year floodplain and for natural 100-year floodplain and for allall mortgages mortgages

Increase coverage limits -- residential $350k to Increase coverage limits -- residential $350k to $470k and commercial $1m to $1.34 m$470k and commercial $1m to $1.34 m

Require mapping of 500-year floodplain, levee or Require mapping of 500-year floodplain, levee or dam failure areas, storm surge areas, land dam failure areas, storm surge areas, land subsidence, coastal erosion, sediment and mud subsidence, coastal erosion, sediment and mud flows, ice-affected areas flows, ice-affected areas

$1.5 billion over 5-years for mapping$1.5 billion over 5-years for mapping

National Flood Insurance National Flood Insurance ReformsReforms

Senate Banking Committee – late May 2006Senate Banking Committee – late May 2006 Accelerated elimination of subsidies for pre-FIRM vacation Accelerated elimination of subsidies for pre-FIRM vacation

homes, non-primary residences, and non-residences homes, non-primary residences, and non-residences (commercial properties), severe repetitive losses and (commercial properties), severe repetitive losses and cumulative > FMV, substantial damagecumulative > FMV, substantial damage

Map 500-year floodplain, natural floodplains behind levees Map 500-year floodplain, natural floodplains behind levees and below dams, other flood related hazardsand below dams, other flood related hazards

Require insurance in residual risk areas behind levees, etc.Require insurance in residual risk areas behind levees, etc. Authorizes $2.8 billion for mapping over 7 yearsAuthorizes $2.8 billion for mapping over 7 years National levees inventory – Parallel efforts underway in National levees inventory – Parallel efforts underway in

Public Works CommitteesPublic Works Committees Increasing fines for lender non-complianceIncreasing fines for lender non-compliance Develop catastrophic reserves; rate for catastrophic years Develop catastrophic reserves; rate for catastrophic years

Water Resources Development Water Resources Development ActAct

Corps of Engineers – Water Resources Corps of Engineers – Water Resources Development Act (H.R. 2864, passed House 7/05; Development Act (H.R. 2864, passed House 7/05; $13 billion, 500+ projects, pre-Katrina; S. 728, $13 billion, 500+ projects, pre-Katrina; S. 728, reported Senate Environment and Public Works reported Senate Environment and Public Works Committee, $14 billion, 300+ projects, pre-Katrina)Committee, $14 billion, 300+ projects, pre-Katrina) Major Policy issues and cost issuesMajor Policy issues and cost issues Upper Mississippi River Navigation ExpansionUpper Mississippi River Navigation Expansion

S. 2288, Water Resources Planning and Modernization Act of S. 2288, Water Resources Planning and Modernization Act of 2006 (Feingold –McCain) – Corps Reform legislation 2006 (Feingold –McCain) – Corps Reform legislation Key issues:Key issues:

Incorporate Katrina lessons – minimize vulnerabilities when Incorporate Katrina lessons – minimize vulnerabilities when using floodplainsusing floodplains

Prioritization of Corps of Engineers projects by revived Water Prioritization of Corps of Engineers projects by revived Water Resources CouncilResources Council

Revise “Principles and Guidelines” for Planning ProjectsRevise “Principles and Guidelines” for Planning Projects Establish Independent Peer Review programEstablish Independent Peer Review program Mitigation to at least levels required by Corps Regulatory Mitigation to at least levels required by Corps Regulatory

ProgramProgram Levees – regulation and oversightLevees – regulation and oversight

What is likely to happen?What is likely to happen?

Change difficultChange difficult Short legislative yearShort legislative year Growing Concern about “earmarks” Growing Concern about “earmarks”

and political corruptionand political corruption Strong Need for Administration Strong Need for Administration

LeadershipLeadership Debate has startedDebate has started

Our View:Our View:

Our view is it will be impossible to reverse the Our view is it will be impossible to reverse the negative trends only by removing a few subsidies. negative trends only by removing a few subsidies. Will require much stronger and wiser land use and Will require much stronger and wiser land use and building standards, continued aggressive efforts to building standards, continued aggressive efforts to buyout higher risk homes and businesses, much buyout higher risk homes and businesses, much better hazard mapping, planning for ultimate better hazard mapping, planning for ultimate development (“future conditions”), elimination of development (“future conditions”), elimination of subsidies to build and locate in floodplains, and subsidies to build and locate in floodplains, and commitment to generally refrain from future commitment to generally refrain from future floodplain development, while at the same time if floodplain development, while at the same time if we choose to remain in these areas, provide a very we choose to remain in these areas, provide a very high level of protection for existing development.high level of protection for existing development.

Questions???Questions???