Federal flood grants now fund private insurance—with a catch
H.R. 9056 — Community Flood Resilience Act · Filed by Andrew Garbarino (R-NY) · 4 cosponsors · Introduced May 29, 2026 · Referred to committee
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What it does
This bill allows communities receiving federal flood-mitigation grants to spend up to 15% of those funds on premiums for 'parametric flood insurance'—a private-sector product that pays out automatically when measurable flood conditions are met, without waiting for damage assessment. The bill runs for 5 years, requires communities to report on how they promote flood insurance awareness and enrollment, and mandates disclosure of the policy's limits (including 'basis risk'—situations where a flood occurs but individual households don't qualify for payout). FEMA must also report to Congress on whether this approach increases overall flood insurance participation.
Why we flagged it
The bill's core mechanism is to redirect existing federal flood-mitigation grants toward private parametric insurance products, effectively expanding the private flood insurance market while maintaining a federal subsidy. This is a public-private hybrid that shifts risk-transfer mechanisms but does not fundamentally change federal flood assistance.
What the text implies
- Parametric insurance payouts are triggered by objective metrics (e.g., rainfall amount), not actual damage—creating 'basis risk' where a community receives a payout even if no individual household was harmed, or conversely, where households suffer losses but the trigger was not met. The bill discloses this but does not prevent it, potentially leaving vulnerable residents uncompensated.
- Redirecting up to 15% of federal mitigation grants to insurance premiums may reduce funds available for physical resilience projects (levees, drainage, buyouts) that prevent floods rather than insure against them. The long-term trade-off between prevention and insurance is not analyzed.
The full analysis lists 4 implications of this text.
Who stands to gain
private parametric flood insurance underwriters and brokers; reinsurance companies; insurance technology (InsurTech) firms specializing in parametric products