RAA praises US legislation proposal to increase cost of building in flood zones

The Reinsurance Association of America (RAA) has endorsed the Build for Future Disasters Act in the US, a piece of bipartisan legislation reintroduced by representatives Andy Barr and Scott Peters.

The legislation is intended to end the costly cycle of building, flooding, and rebuilding perpetuated by the National Flood Insurance Program (NFIP). It will end NFIP subsidies for newly-constructed properties in areas vulnerable to flooding, with properties built in 2025 or later subject to rates that reflect up-to-date flood risk information.

New constructions would not qualify for a subsidy, while structures built before 2025 in flood zones or re-mapped into flood zones would still be eligible for grandfathering subsidies. The bill also requires the US Government Accountability Office to study the feasibility and implications of lowering all subsidies to a point that puts the NFIP on a path to stronger financial footing.

Lawmakers argue this would reduce the taxpayer burden and government risk by ensuring a more realistic cost of risk.

The Federal Emergency Management Agency (FEMA) recently announced plans to update the NFIP’s risk rating methodology, incorporating more advanced actuarial tools and catastrophe models.

Frank Nutter, president of the RAA, said: “A guiding principle of the Federal government’s natural disaster policy should be to protect the American taxpayer by managing the nation’s escalating natural disaster risks, reducing those risks over the long-term, and promoting environmental stewardship.”