Nature-Based Flood Solutions and the National Flood Insurance Program

United States federal agency programs frequently promote natural features for flood and storm hazard reduction. A natural feature of a watershed or in a coastal landscape is one that would have been present prior to a human alteration of the physical environment. Beaches and dunes are natural by this definition, but not in all locations. Wetlands are natural, but the wetland type and vegetation vary by location. Natural features can be created, or previous watershed and coastal features restored, through engineering design and construction methods often associated with artificial hazard reduction measures. The U.S. Army Corps of Engineers (Corps), and some U.S. federal resource agencies, refer to “engineering with nature” when Natural and Nature-based Features (NNBFs) are constructed to reduce storm and flood hazards. See: https://ewn.erdc.dren.mil/ (accessed June 15, 2022). Nature-based Solutions (NBS) is the term used by the U.S. Federal Emergency Management Agency (FEMA) to characterize natural features that reduce flood and storm hazards (FEMA, 2020). Depending on the landscape setting, NBS may also provide co-benefits, for examples, aquatic habitat, water quality improvement, or carbon sequestration. FEMA is encouraging its Hazard Mitigation Assistance (HMA) grant applicants https://www.fema.gov/grants/mitigation (accessed June 15, 2022) to propose NBS for flood and storm hazard reduction, alone or in combination with traditional measures such as levees, seawalls, shoreline rip-rap, flow diversion channels and dams. Reliance on NBS for flood and storm hazard reduction has earned the widespread support of NGOs such as the Environmental Defense Fund (Cunniff, 2019) and the Chesapeake Bay Foundation (Myers, 2021).As with traditional hazard reduction measures, NBS are capital investments, often with continuing operations and maintenance requirements, made by a community to benefit multiple properties. In seeking to invest in NBS, communities confront a reality of limited implementation budgets, and will be looking to the Corps, FEMA grants and other federal and state agencies for funding, just as they would for traditional flood risk reduction measures. If the NBS is a Corps project, a community will need funding to act as a cost share partner (Carter and Normand, 2018). If an NBS is going to be paid for with a FEMA grant, a community cost share may be required. The Nature Conservancy (TNC), with support from FEMA, published a report offering detailed policy and technical advice to FEMA grant applicants who are required to contribute to the cost for NBS. https://www.fema.gov/case-study/partner-developed-guidance-connects-use-nature-based-solutions-femas-mitigation-programs (Accessed June 15, 2022)However, securing community funding for nature-based solutions can be a challenge. A community might pay its share for a NBS from different revenue sources including general tax receipts, special purpose assessments such as storm water fees, or from beneficiary fees or taxes paid by those who benefit from an investment (Colgan, 2017). Paying for NBS from general revenues may be justified if the NBS maintains the community tax base by protecting property values. Another revenue source is capturing a share of a benefitting property owner’s flood insurance premium savings when an NBS reduces flood hazard at that property. In fact, beneficiary payments are widely used to pay the costs for levee improvement and maintenance, as well as beach and dune nourishment projects that protect private property (Mullin et al., 2019).However, despite FEMA’s emphasis on NBS for flood and storm hazard reduction, current premium setting practices in the National Flood Insurance Program (NFIP) cannot recognize protection from NBS hazard reduction projects or offer premium savings to insured properties benefited by the NBS. Thus, two opportunities are missed. First, without NFIP recognition of NBS hazard reduction, arguments within a community for dedicating general revenues to NBS investments are less compelling. Second, a community will not have access to a revenue source that might partially pay for the NBS.The next section of this paper describes how state-of-the-art modeling can predict reductions in property-specific hazard reduction from investments in NBS. The next section of this paper summarizes Risk Rating 2.0 (RR2.0) practices for setting premiums, and the reasons the hazard reduction realized from NBS investments are not reflected in reduced NFIP premiums. In October 2021, the NFIP implemented Risk Rating 2.0: Equity in Action and began charging premiums that better reflected property-specific flood risk. The paper concludes by proposing a way the NFIP can recognize NBS hazard reduction when setting NFIP premiums for a group of insured properties.