A new challenge for flood insurance

Politico

11-07-2025

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QUICK FIX
Devastating floods in Texas are exposing a growing problem that Congress may have to weigh when considering overhauling the National Flood Insurance Program.
As extreme weather and flooding become more frequent in areas where homeowners don't typically hold federal flood insurance policies, policymakers could be forced to look at how to make the NFIP more attractive to non-coastal homeowners. However, this could tax the program even more as it nears its $30.4 billion debt ceiling.
The floods in Texas and continued cleanup from the deluge in North Carolina have brought the issue front and center as Congress begins to figure out how to sustain a program that acts as the country's de facto risk management tool for flood events.
Only about 2 percent of Kerr County, Texas, and 1.5 to 7 percent of surrounding counties, the main area impacted by the Texas flooding, are insured, leaving a large majority of the estimated 65,000 residential structures uncovered, according to data from the NFIP.
'It just exposes the flood insurance gap, and that we all need to continue to do a better job of making sure that people realize that floods can happen anywhere, and they do happen, they're devastating, and so insurance is one way you can help protect the financial future of your family or small business,' said David Maurstad, former senior executive of the NFIP under the Biden administration.
NFIP provides 95 percent of all flood insurance policies in the country, but the program has been subject to a cycle of short-term reauthorizations by Congress. The next deadline is Sept. 30, marking the 34th reauthorization in eight years. Lawmakers have avoided tackling a long-term strategy to improve the NFIP, which is chronically in billions of dollars of debt to the Treasury and is being pushed closer to a breaking point with every new natural disaster.
The aftermath of flooding in places outside of coastal areas prone to hurricanes may force policymakers to confront the new reality that could add even more pressure to the embattled program: If property owners in communities surrounding the areas impacted by the flood in Texas follow the typical trend, some may start looking to buy NFIP policies.
But expanding access to the program won't be easy. One of the main barriers to flood insurance policies is people's willingness to pay the price.
NFIP's new pricing model, Risk Rating 2.0, implements additional flood risk variables and 'is mandated by Congress to set rates that are actuarially sound to reflect each covered property's true flood risk and are fairly distributed based upon individual risk levels,' according to the program's website.
The average NFIP premium is $786 per year, according to FEMA data from 2023.
Risk Rating 2.0 has gotten some flak from lawmakers. In June, Sen. Bill Cassidy (R-La.) and nine other colleagues demanded an end to the policy. They said that NFIP premiums have increased in every state and 'by FEMA's own estimates, 77 percent of all NFIP policies now pay more than under the old system.'
Congress has 'got to look at [NFIP], and they've got to incentivize it, or something else a little more so you can start to get more coverage across the country' not just in the traditional coastal areas, said Chris Steubing, executive director of the Texas Floodplain Management Association.
NFIP talks are ongoing, both insurance subcommittee chairs, Rep. Mike Flood (R-Neb.) and Sen. Mike Rounds (R-S.D.), have previously told POLITICO, and both members want to make progress this year. But no concrete plan has materialized yet.
'I'm concerned that there's a lot of people out there who might consider buying flood insurance if it was less expensive,' Rounds said.
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