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Cutting-edge approach needed to revamp flood insurance, flood risk analysis

This article first appeared in the St. Louis Beacon: WASHINGTON – With the price of flood insurance on the rise and climate change likely to worsen Midwest flooding, a scientific panel wants federal emergency officials to modernize the outmoded tools used to analyze the probability and impact of floods.

Such a change, if adopted by FEMA, could have major consequences in Missouri and Illinois, where debates over flood insurance, FEMA flood mapping, and flood damage from the Mississippi and Missouri rivers have dominated much of the discussion in the Metro East and other low-lying regions.

And the report by the National Research Council is timely because FEMA’s head, Craig Fugate, warned at a conference this week in New Orleans that  major rate hikes will be phased in over three or four years for many people who have flood insurance.

Those rate increases are coming because in reauthorizing the debt-ridden National Flood Insurance Program (NFIP) last summer, Congress phased out subsidies for many properties (such as second homes, business properties and “repetitive loss” properties) and required that premiums for newly insured properties meet the full actuarial costs.

“We’re seeing flood losses continuing to rise,” said Gerald E. Galloway, an engineering professor at the University of Maryland who chaired the panel that produced the report. The National Weather Service predicts about $8 billion a year in flood losses, he said, “and, with climate change, we can expect to see it rise.”

Galloway – a former Corps of Engineers general who wrote a much-quoted report on the 1993 floods of the Mississippi and Missouri rivers – told reporters: “Add to that population growth and the entire issue of the development of homes and structures [in the floodplain], and our problems are going to increase unless we take some actions.”

The report – “Levees and the National Flood Insurance Program: Improving Policies and Practices” -- says that in administering the flood insurance program, FEMA needs to take a more up-to-date approach to analyzing as well as managing the risks of flooding behind levees.

“Property owners would be more favorably inclined to buy flood insurance if individual risk is well-known, understood, and insurance rates are priced to match the probability of flooding and financial impact of flooding events,” the report says.

The report also recommends that FEMA bypass a new interim step called the levee analysis and mapping procedure (LAMP). That would replace the existing “without levee” approach with one that would better reflect the flood risk to areas with non-accredited levees, such as flood-prone parts of Metro East until ongoing levee improvements are completed.

In January, the Corps -- after months of delay -- approved the plan and timeline for about $160 million in work on the 74-mile-long levee system protecting much of Metro East. Scheduled for completion early in 2015, the project would prevent FEMA from placing part of the region in a “flood hazard zone” that could trigger a requirement for homes and businesses to buy flood insurance.

The Southwestern Illinois Flood Prevention District Councilis overseeing the levee repairs, which aim to block a potential $50 million in annual flood insurance costs in the Metro East region. During Congress' consideration of the flood insurance bill last summer, Illinois lawmakers, with Missouri allies, succeeded in killing a controversial “residual risk” provision – opposed by many in Metro East – that would have mandated flood insurance for homeowners who live behind approved levees. 

“There are communities out there that are in some form of limbo,” Galloway conceded. “We believe that communities committed to accrediting their levees – working to make sure their levees are brought up to the standards – would be allowed to continue in the program without having to buy flood insurance or regulate the areas behind levees, as long as they committed to a remediation program that committed them to (over a specified period) take care of the deficiencies . . . and return the levee to the standards at which it was originally authorized.”

Galloway said that, even though LAMP was based on solid science and responded to congressional concerns, it distracted from the overall need to adopt the new approach of “risk management” over the more traditional disaster-prevention approach to flood control.

The newer approach “acknowledges that you can’t provide absolute protection against any flood, and therefore you should be addressing the challenges of reducing the risk to the time that a flood might occur in your area.

“You want to use multiple tools to reduce the risk for those in the floodplain and those behind levees: razing homes, flood proofing, early warning systems, and transferring some of the risk through insurance.”

Need for cutting-edge tools for risk analysis

The National Research Council commissioned the report at the request of FEMA, which Congress has tasked with setting flood insurance premiums in a way that recovers actual costs.

In recent years, the number of extreme weather events has increased, causing hugely expensive flooding in Mississippi and Missouri river basins and in coastal areas, such as the damage caused by last fall’s Superstorm Sandy.

In administering the flood insurance program, the report found, it is critical that FEMA adopt a modern approach to analyzing and managing flood risk behind levees.

Such cutting-edge computational and mapping techniques would be able to produce state-of-the-art risk estimates for areas vulnerable to flooding. It would assess how well levees are likely to perform, giving property owners and communities a more accurate view of the risks they face. It would also account for partial protection offered by non-accredited levees.

For example, Galloway said, such tools would do a better job of analyzing flood threats: How high will a river rise and how frequently will it surpass a specified flood level? And, in analyzing the levees, he said the tools would “instead of just looking at whether a levee is high enough to hold off a flood of a given elevation [examine whether] levee is strong enough under all circumstances, to withstand the impact of that flood.”

While the report says the flood insurance program uses a sound actuarial approach for calculating rates, it says the program is financially unsound over all – at least $20 billion in the red as of last year – because of disastrous events and the fact that Congress requires FEMA to offer discounts on about a fifth of the policies it issues.

The flood insurance program was established in 1968 to provide insurance to property owners who, in the years before, had not been able to buy it when they lived in flood-prone areas. It now administers more than 5.5 million policies in 22,000 communities. The insurance is mandatory for properties with federally backed mortgages in some areas, but the “mandatory purchase requirement” is waived for properties protected by Corps-certified levees.

The report said FEMA should encourage communities to develop more comprehensive strategies to manage flood risk: Rather than relying entirely on structural methods such as levees and floodways, the experts said communities should consider non-structural techniques, which include flood-proofing, elevating or relocating structures, evacuation planning, and buying flood insurance. It also said FEMA also should work with local communities to better communicate flood risk to the public.

“Over the past two decades, this country and the world at large has moved from trying to control flooding to flood risk management,” said Galloway, “You can't provide absolute protection, so you want to use all the tools available to make sure that risk is lessened.”

Reaction to the report was mixed. Steve Ellis, vice president of Taxpayers for Common Sense, said his group agreed with its emphasis on the need for better floodplain management and risk assessment. But he told the Beacon that his group wanted to see tougher enforcement by FEMA to make sure that property owners pay for flood insurance if there is consistent risk of flooding.

In an interview, Ellis also took issue with the report’s finding that the NFIP rates are actuarily sound, when in reality the pool of people and businesses buying flood insurance is skewed toward those with greatest risk. And he said the government subsidizes the NFIP by not requiring it to maintain a reserve or to buy reinsurance.

In addition to Galloway, other members of the NRC panel that wrote the report included J. David Rogers, who chairs the Geological Engineering department at the Missouri University of Science and Technology in Rolla, and Karin M. Jacoby, president of the Spica Consulting engineering firm in Kansas City.

Rob Koenig is an award-winning journalist and author. He worked at the STL Beacon until 2013.