Letter to William Craig Fugate, Administrator, Federal Emergency Management Agency - Demanding FEMA Provide Oversight of National Flood Insurance Program
Letter
We write to request that FEMA fulfill its legal obligation to provide oversight of the private insurance companies that participate in the National Flood Insurance Program (NFIP).
In the wake of Superstorm Sandy and other recent disasters, FEMA and NFIP have faced accusations of incompetence and fraud. During the recently aired Frontline documentary "The Business of Disaster," which examined issues with flood insurance after Superstorm Sandy, Roy Wright, Deputy Associate Administrator for Insurance and Mitigation, was asked if he knew how much profit private insurance companies servicing NFIP were making. He responded, "I've never looked at the book of business to understand their profits."
Frontline did look at those numbers, and it concluded that private insurers made more than $400 million in profits from FEMA in the year that Hurricane Sandy devastated the Atlantic coast -- its highest profit in the 4-year period from 2011 to 2014. At the same time, many of those insurers were underpaying or outright denying legitimate flood insurance claims.
FEMA's lack of awareness is both unacceptable and easily fixable. The agency has already been directed by Congress to review the finances of these companies. An important provision of the Biggert-Waters Flood Insurance Act of 2012 required FEMA to issue regulations to ensure that federal "reimbursements track the actual expenses [of private flood insurance companies] as closely as possible." The law required FEMA to issue a rule within a year of the law's enactment to establish a process to collect the necessary data from these companies. Almost four years later, FEMA has not issued the rule.
We request that FEMA move as expeditiously as possible to formulate and issue the rule, and that you provide us with an estimated timeline and periodic status updates as you work to meet this congressional mandate. Taking that step would help to restore accountability to the NFIP. We look forward your response.
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