Senators consider Alaska-run flood insurance proposal to replace federal program

Senator Bert Stedman told the Senate Finance Committee that Senate Bill 11 would create an Alaska-based flood insurance program and an Alaska Flood Authority Fund intended to keep premium dollars in-state and to provide higher coverage for Alaska property owners.

The sponsor said the move responds to recent FEMA map updates and a new FEMA rate-making method, Risk Rating 2, which he said has expanded flood zones and increased premiums for many Alaskans. "Between 02/2021, Alaskans paid over $41,000,000 in premiums and received $6,500,000 in claims paid," Stedman told the committee, saying that distribution of premiums and claims appeared unfavorable to Alaska policyholders.

Stedman said the bill would allow the state to set higher coverage limits than the National Flood Insurance Program (NFIP) and avoid what he described as federal policies that discourage coastal settlement by restricting construction methods. He also described the proposal as intended to be self-funding after any necessary seed capital and said Alaska Housing Finance Corporation (AHFC) might be a source of start-up capital.

Committee members and agency witnesses raised technical questions. Senator Kaufman asked about AHFC’s willingness to provide seed capital and whether that would affect AHFC programs; Stedman acknowledged the funding details would need further work. Senator Keel asked whether the bill would cover landslides and was told the current draft includes coverage for mudflow but not landslide; staff clarified the technical difference.

Rose Foley, Division of Insurance staff, said the bill would set up the Alaska Flood Authority Fund as a fund in the state Treasury outside the general fund, and the committee discussed whether the fund should be explicitly protected from sweeping to the general fund.

Fiscal notes submitted to the committee identified administrative and startup costs. The Department of Commerce, Community, and Economic Development (commissioner’s office, OMB component 1027) did not anticipate current-year costs to set up the fund. The department’s Division of Community and Regional Affairs (OMB 2879) included several hundred thousand dollars in FY26 and three permanent positions in subsequent years; the Division of Insurance (OMB 354) listed receipt-supported services and two permanent positions; Alaska Housing Finance Corporation operations (OMB 110) gave an indeterminate fiscal note because a $5 million backstop might or might not be called on.

The committee opened and closed public testimony without in-room commenters and set the bill aside for further work; Senator Stedman volunteered staff coordination with Senator Keel’s office over the interim. No final committee vote on enactment was taken at the hearing.

Key issues identified in the hearing included the distribution of premiums and claims under NFIP, the administrative design and capitalization of a state program, whether the fund should be protected from sweeps or annual appropriations, and whether the program should begin narrowly (flood only) and later expand to cover hazards such as landslide.