Community Flood Resilience Act
- Sponsor
- Rep. Garbarino, Andrew R. [R-NY-2]
- Committees
- Financial Services Committee (primary)
- Last action
- May 29, 2026
Bottom line
The bill aims to enhance community flood resilience by allowing federal mitigation grant funds to be used for innovative parametric flood insurance, complementing traditional NFIP coverage.
What it actually does
This bill directs the Federal Emergency Management Agency (FEMA) to permit states and communities receiving Flood Mitigation Assistance (FMA) grants to use up to 15% of those funds annually for five years to pay premiums for community-based, parametric flood insurance policies. It also allows other FEMA grant funds to be used for this purpose and mandates FEMA outreach and reporting on the program's effectiveness, including its impact on National Flood Insurance Program (NFIP) participation. The bill requires specific disclosures for parametric policies regarding trigger conditions and 'basis risk'.
Proponents argue
Supporters argue that this bill addresses chronically low NFIP participation in high-risk communities by promoting engagement with private flood insurance markets. They contend that community-based parametric flood insurance offers faster, more transparent, and flexible financial protection, serving as a vital supplemental layer of risk transfer that can strengthen overall community resilience and insurance awareness.
Opponents contend
Critics might express concerns that diverting existing flood mitigation grant funds, even a small percentage, could reduce direct investments in physical mitigation projects. They may also worry about the potential for 'basis risk' in parametric policies, where a triggering event occurs but individual households or businesses do not receive direct relief, potentially leading to confusion or unmet expectations, despite disclosure requirements.
The bill is concise and straightforward, allowing a reader to grasp its core provisions and implications well within the time typically allotted for legislative review.
Section 3(a)
Use of Flood Mitigation Assistance Grant Amounts for Parametric Flood Insurance Premiums
This provision allows states and communities that receive Flood Mitigation Assistance (FMA) grants from FEMA to use up to 15% of those grant funds each year for a period of five years to pay for premiums of community-based, parametric flood insurance policies. These policies must be offered by the private sector, have objective, predefined trigger conditions for payouts, and disburse funds promptly upon verification of a trigger, without requiring post-event damage assessment by FEMA.
Supporters argue
Supporters argue this provision provides communities with a valuable tool to enhance financial resilience, offering faster payouts than traditional insurance and complementing existing mitigation efforts. It encourages innovation in the private insurance sector and allows communities to tailor their risk management strategies.
Critics contend
Some might argue that diverting FMA funds, even a portion, from direct physical mitigation projects could reduce the overall effectiveness of flood risk reduction. They may question whether insurance premiums are the most effective use of funds intended for long-term structural or non-structural mitigation.
Tradeoffs
The provision balances the immediate financial protection offered by insurance with the long-term risk reduction achieved through physical mitigation. It also navigates the tension between federal support for traditional NFIP and fostering private market solutions.
Section 3(c)
Disclosure Requirements for Parametric Flood Insurance Policies
This section mandates that any community-based, parametric flood insurance policy purchased with federal grant funds must include a written disclosure. This disclosure must clearly explain the specific trigger conditions for payouts, the circumstances under which a triggering event might occur without individual households or businesses receiving direct financial relief (known as 'basis risk'), and how the parametric policy interacts with and differs from the National Flood Insurance Program (NFIP).
Section 3(d)
FEMA Reporting to Congress on Program Effectiveness
This provision requires the FEMA Administrator to submit reports to Congress one, three, and five years after the bill's enactment. These reports must analyze changes in NFIP policy enrollment in communities using these grant funds for parametric insurance versus those that do not. They must also describe the types of parametric policies used, assess the timeliness and effectiveness of claim payouts, evaluate outreach efforts, and provide legislative recommendations for the program's continuation or expansion.
The permission for States and communities to use grant amounts for parametric flood insurance premiums, and for the Administrator to allow the use of other grant amounts for this purpose, will terminate on the date that is 5 years after the date of the enactment of this Act, absent a reauthorization by Congress.
Section 3(a)(3) and Section 3(b)(2)
Why it matters:This is standard legislative practice for pilot programs or temporary authorities, allowing for evaluation before permanent authorization. It is not necessarily evasive but could be overlooked by a casual reader focused on the immediate permissions.
Case for: Proponents argue that a sunset clause allows for a controlled pilot period to assess the effectiveness and unintended consequences of using federal funds for parametric insurance before committing to a permanent program. This provides an opportunity for data-driven reevaluation.
Case against: Critics might suggest that a 5-year sunset period creates uncertainty for communities and private insurers, potentially hindering long-term planning and investment in parametric products. They might argue that a longer initial period or a clearer path to reauthorization would encourage greater participation.
Estimated impact: Limits the program's duration to five years, requiring legislative action for continuation.
Any community-based, parametric flood insurance policy must include a written disclosure explaining 'the circumstances under which a triggering event may occur but individual households or small businesses within the community may not receive financial relief (commonly referred to as the "basis risk").'
Section 3(c)(2)
Why it matters:The inclusion of 'basis risk' disclosure is a crucial consumer protection measure, reflecting a genuine concern about the nature of parametric insurance. Its placement within disclosure requirements is appropriate, though the technical term could make it less immediately obvious to a casual reader.
Case for: Proponents emphasize that clearly explaining 'basis risk' is essential for informed decision-making by communities and their residents. It manages expectations and prevents potential disappointment or confusion if a flood occurs but the parametric policy's specific triggers are not met, or if payouts are not directly distributed to individuals.
Case against: No direct opposition to disclosing 'basis risk' is expected, as it promotes transparency. However, some might argue that the complexity of explaining 'basis risk' could deter communities from adopting parametric policies, even if the benefits outweigh the risks.
Estimated impact: Ensures transparency regarding a fundamental limitation of parametric insurance, potentially influencing community adoption and public understanding.