Flood insurance in Cedar Rapids running dry?

Without its reauthorization Corridor residents in the flood plain would need to pay more for coverage

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Among the lesser-mentioned priorities before Congress as members returned from its summer break is a lesser-noted one that’s become known to more Iowans over the past decade.

And it comes with a very short — and potential costly — deadline.

Unless Congress passes reauthorizing legislation, the National Flood Insurance Program, or NFIP, will expire Sept. 30. Expiration would mean the Federal Emergency Management Agency, which administers NFIP, wouldn’t issue new policies or renew or increase coverage on existing ones.

“Anyone trying to obtain a loan for a property located within the one-percent annual chance (100-year) flood plain would not be able to purchase one through the NFIP and, therefore, would not be able to close the loan,” Jason Conn, the Iowa Department of Natural Resources’s NFIP specialist, wrote in an email.

“It’s a concern for everybody, and it’s something we’re monitoring,” said Cedar Rapids real estate agent Nick Polum. A lapse “hinders the sale of the property pretty well.”

“A lapse in the NFIP would potentially cause issues with the real estate market, both residentially and commercially,” said Sandy Pumphrey, project engineer for the city of Cedar Rapids. “It’s alarming because there are so many people who rely on flood insurance. I hope it doesn’t happen because I really don’t want to find out what (a lapse in authority) means.”

The 100-year flood plain includes much of downtown Cedar Rapids, all the New Bohemia and Czech Village neighborhoods, and significant swathes of the Ellis and Time Check areas on the Cedar River’s west bank.

Existing policies may be transferred to a new owner in the event of a sale if the coverage hasn’t lapsed. Coverage and claims under existing policies would be paid even if NFIP lapses.

But if Congressional reauthorization isn’t applied retroactively, new and renewed coverage becomes effective on the date of authorization — and flood damage during the lapse period won’t be covered.

Chances for reauthorization likely improved in recent weeks, with historic flooding in Texas triggering tens of thousands of claims and another potential catastrophe bearing down on the Southeast in the form of Irma. But a “clean” reauthorization without changes to NFIP’s present form and operations would preserve its weaknesses.

‘A sensitive topic’

Even before Hurricane Harvey, NFIP was about $24 billion in debt, mostly due to claims paid on damage from Hurricanes Katrina and Sandy. The program loses about $1 billion a year.

Any proposals for significant NFIP changes likely would delay or even derail reauthorization. Backers hope for a clean reauthorization for a relatively short period — perhaps as brief as three months.

“Clearly, with the current flooding and future potential with hurricane season in full swing, this will be a sensitive topic,” Julie Gliha, the Iowa Bankers Association’s vice president for compliance.

NFIP critics are offering a range of possible fixes for its problems — limiting transferable policies and coverage of high-value properties, and elimination of coverage for properties that experience repeated claims. Repeat claims occur on just one percent of NFIP policies but represent 25 to 30 percent of its costs.

Some proposals would allow private insurers to write flood policies, a change critics fear would price middle-class property owners out of coverage.

Private flood insurance is available, “but our experience is that most policies are still written under the NFIP program due in part to the cost of a private policy versus a policy through the NFIP,” according to Gliha.

Federally insured institutions and federal-agency lenders such as the Small Business Administration and the Department of Agriculture’s Rural Development program require flood insurance on structures within the 100-year flood plain.

There’s no law requiring private lenders to mandate flood insurance from borrowers, although many do to protect their investment.

In Iowa, communities participating in NFIP jumped 35 percent, to 671, over the past decade, according to Iowa DNR’s Conn. There were 1,680 NFIP policies worth $411 million on Cedar Rapids properties at the end of June.

A city must meet standards for flood protection and mitigation to qualify for NFIP coverage. Cedar Rapids’ flood control system now under construction — designed to convey a 2008 river stage through the city without damage — would mean lower insurance rates for property owners in the city, Pumphrey said.

Cedar Rapids now qualifies as a 6 on FEMA’s 10-point scale, for a 20-percent discount on NFIP premiums. Pumphrey hopes the project could lower the city’s rating to a 4 within a year, increasing the discount.

“It’s a significant amount,” he said. “We can see some significant savings communitywide.”

In a statement Thursday, Republican U.S. Sen. Chuck Grassley’s office noted that the proposed Continuing Resolution to continue government funding would extend the NFIP through Dec. 8.

But, Grassley said, “it’s unclear so far whether Congress will enact a straight extension of the existing program or consider a reauthorization that fixes the problems with the current program.”

Leigh Claffey, press secretary for Republican U.S. Sen. Joni Ernst, said “we expect a short extension and do not anticipate a lapse in coverage.”

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