Disaster Discourse: The Hagerty Blog

Stop Rewarding Risk: How the Next FEMA Administrator Can Encourage Resilient Development

In a recent interview with Boston’s WBUR radio station, former Federal Emergency Management Agency (FEMA) Administrator Craig Fugate claimed that some FEMA policies may allow individuals and businesses to develop areas that are vulnerable to natural hazards.

FEMA Administrator Craig Fugate briefs President Barack Obama ahead of Hurricane Sandy in October, 2012. Credit: The Associated Press.

Fugate argued that current disaster recovery policies create a federally funded safety net for those without private insurance policies, which distorts property owners’ perceived risk of common hazards. This federal safety net poses a long-term risk to new development, and impedes resiliency and strategic community preparedness. Addressing these structural issues will be of critical importance for the next FEMA Administrator.

Two specific problems that Administrator Fugate cited as weaknesses in national doctrine are the National Flood Insurance Program and the use of Public Assistance (PA) funds for uninsured losses.

National Flood Insurance Program (NFIP)

The NFIP insures against damage caused by flooding, which is not typically covered by homeowner’s insurance policies. The original intent of the program was to limit the amount of federal disaster relief awarded following a disaster—theoretically reducing the cost burden on both the affected locality and the federal government, and thereby, the taxpayer.  However, the program has generally had the opposite effect.

Shortly after the NFIP was established, Hurricane Agnes struck the East Coast and caused $4 billion of damage. Only $5 million of that value was insured. As a result, the affected communities, states, and the federal government were then responsible for paying the remaining $3.9 billion to recover from the hurricane. This initial failure of the NFIP to achieve its purpose was chalked up to a lack of incentive to join the program. After mandating that homeowners in low-lying areas buy into the NFIP, there were over 22,000 communities participating in the NFIP in 2016. The same year, it was reported that the NFIP owes the United States Treasury $23 billion after Hurricane Katrina ($16.3 billion) and Hurricane Sandy ($8.3 billion) contributed to its debt.

The NFIP enables communities to deflect some of the costs to recover from a disaster by using money collected through insurance premiums to pay for restoration. However, many emergency managers believe that the act of insuring property owners living in floodplains also tacitly reinforces risky behavior rather than encouraging homeowners to relocate or to implement hazard mitigation techniques. In Administrator Fugate’s words, this practice “subsidiz[es] risk below the point where behavior will change. And then we can’t understand why it won’t change.”

Public Assistance: “Insuring” the Uninsurable

Under the Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act), FEMA’s PA Program provides funding to state and local governments impacted by a presidentially declared disaster. Part of the Stafford Act’s stated intent is to: “Encourag[e] individuals, states, and local governments to protect themselves by obtaining insurance coverage to supplement or replace governmental assistance.”

However, PA pays up to 75 percent of disaster-related costs that cannot be paid by another entity, to avoid unnecessary duplication of funding. In other words, “[W]hat FEMA pays for is what is considered uninsured losses. So every fire station, every school, every courthouse, every public building that we put money into, that’s because they didn’t have insurance.” By using PA as a means to pay for uninsured losses, the program enables maintenance of the status quo, rather than encouraging redevelopment that qualifies for private insurance.

How the Next Administrator Can Encourage Resilient Redevelopment

While it is extremely difficult to change behaviors and program philosophies that have been in place for decades, the next FEMA Administrator has the power to ground the public’s perception of risk and adopt a more strategic approach to spending tax dollars. Here are three changes to policy that could help improve the assessment of risk at both individual and institutional levels that should be considered by the next Administrator:

  1. Reform the Public Assistance Program – Reforming the PA program to encourage mitigation and improvement projects over rebuilding to pre-disaster conditions would enable local jurisdictions to focus on leveraging the effects of a disaster to maximize future resilience.
  1. Incentivize the Adoption Standards for Resilient Construction – Promoting the adoption of standards for resilient construction such as standards set forth in the National Institute of Standards and Technology’s Community Resilience Planning Guide would provide definitive guidance for the construction of both individual structures and publicly owned facilities. Adherence to higher development standards and building codes, such as the update of codes conducted in Florida in 2001, would translate to increased likelihood for private insurance eligibility and fewer instances of post-disaster reconstruction.
  1. Promote Policies that Remove Subsidies for Development in High Risk Areas – By taking a more strategic approach to disaster recovery and redevelopment, the new Administrator could create policies that contribute to a gradual transition of public facilities out of high-risk areas. The move into safer parts of a locality would be helped by more stringent building-back regulations.

Disasters cannot be prevented. It’s the reason that communities are striving to become more socially, economically, and physically resilient to disasters. Encouraging public infrastructure resilience requires improving the way that jurisdictions respond to and recover from acute shocks—including making recovery from disasters more sustainable. Revising the mechanisms that authorize federal disaster-relief funding may provide meaningful motivation for localities to strive to create more self-sufficient communities.


Kayla Slater is a Preparedness Associate with Hagerty and doubles as the company’s internal resilience lead. Kayla helps clients to develop innovative and customized plans and operational tools to support long-term recovery and redevelopment. Currently located in Washington, D.C., Kayla is a graduate of Georgetown University’s Emergency and Disaster Management Program.