Enhancing Flood Resilience: The Crucial Role of Risk Transfer and Reduction

The Importance of Reauthorizing NFIP

Last week's Senate Banking Committee hearing on the reauthorization of FEMA's National Flood Insurance Program (NFIP) highlighted the urgent need for Congress to reauthorize NFIP. This reauthorization is crucial for communities, businesses, and governments at all levels to invest in mitigating flood risk and improving resilience. The hearing emphasized that federal policies and programs, including NFIP, are essential, but resilience investment decisions are ultimately local.

Risk Transfer and Reduction Strategies

Daniel Kaniewski, managing director for Marsh McLennan, testified that risk transfer, including from NFIP, private flood insurance, reinsurance, and parametric insurance, should be paired with risk reduction. He highlighted NFIP's Community Rating System (CRS), which rewards communities for exceeding minimum floodplain management requirements. For instance, Tulsa, Okla., and Roseville, Calif., have achieved the highest CRS rating, offering residents a 45 percent discount on flood insurance premiums. This approach not only reduces insurance costs but also encourages community investment in resilience.

Community-Based Catastrophe Insurance and Industry Collaboration

Kaniewski also discussed community-based catastrophe insurance (CBCI), which uses parametric insurance to cover local government entities. This approach enhances financial resilience by providing affordable coverage and incentives for risk reduction. He cited the CBCI pilot in New York City as an example of successful collaboration between the city, nonprofits, and the insurance industry. Kaniewski called for broader industry collaboration, including finance and real estate, to encourage flood resilience investments. He referenced the National Institute of Building Sciences' roadmap for resilience incentives, which focused on residential structures prone to flooding and was co-authored by representatives from various industries.

In conclusion, enhancing flood resilience requires a multifaceted approach involving risk transfer, risk reduction, and broad industry collaboration. Communities that invest in resilience not only reduce their flood risk but also enjoy lower insurance premiums and higher property values. For readers, the key takeaway is the importance of advocating for and investing in flood resilience measures to protect communities and property.