KBRA Examines FEMA Reform Recommendations and State Disaster Roles

Kroll Bond Rating Agency (KBRA) has released a report, Good News/Bad News: FEMA Review Council's Recommendations Are a Mixed Bag, examining recommendations from the president's Federal Emergency Management Agency (FEMA) review council. The report outlines proposals to shift FEMA toward a supporting role while placing greater responsibility for disaster response and recovery on state, local, tribal, and territorial governments. According to KBRA, the recommendations are intended to streamline disaster assistance and reduce administrative burdens but could also increase financial risk for state and local governments.  

A central theme of the report is the proposed transfer of disaster management responsibilities from the federal government to states and localities. The review council recommends that emergency response follow the principle of being "locally executed, state or tribally managed, and federally supported." Per the report, this approach could provide faster access to recovery funds but would also require states and local governments to assume greater responsibility for funding oversight, compliance, and disaster preparedness.  

The report also examines a proposal to replace FEMA's current public assistance reimbursement program with the Reformed and Partnered Initiative for Disasters (RAPID). Under this model, FEMA would provide formula-based payments to states within 30 days of a presidential major disaster declaration, rather than reimbursing documented project costs. According to KBRA, while the approach could accelerate funding, it could also expose states and local governments to higher financial risk if actual recovery costs exceed the formula-based payments. The report notes that congressional approval would be required before the proposal could be implemented.  

Another recommendation would make federal disaster assistance more difficult to obtain by raising or revising disaster declaration thresholds, using clearer measures of disaster severity, and evaluating whether state and local governments have sufficient capacity to respond without federal support. According to the report, these changes are intended to reserve federal assistance for larger disasters but could result in fewer federal disaster declarations and greater financial responsibility for states and local governments.  

KBRA also reviews recommendations affecting the National Flood Insurance Program (NFIP). The report states that proposed reforms are intended to reduce federal obligations, improve pricing through continued implementation of Risk Rating 2.0, and gradually increase private-sector participation in the flood insurance market. Per KBRA, the recommendations include expanding access to flood-loss and exposure data, reassessing community rating system incentives, and exploring affordability measures alongside actuarially sound pricing.  

The report further discusses the NFIP's Write Your Own program, under which private companies distribute NFIP policies while FEMA retains the insurance risk. According to KBRA, the review council recommends reviewing commission payments to participating companies, noting that lower commissions could reduce program expenses and potentially encourage greater private market participation. The report also outlines a proposal for a marketplace that would facilitate greater use of private flood insurance, although KBRA notes that the private market remains significantly smaller than the NFIP and that expanding private capacity will likely take time.  

In its conclusion, KBRA states that the review council's recommendations continue the broader trend of shifting responsibilities and costs from the federal government to states and localities. However, the report emphasizes that the recommendations do not change existing law and instead serve as a blueprint for potential FEMA reforms, many of which would require congressional action before taking effect.