It looks like the problem is that he built a house worth considerably more than $350,000.00 on the waterfront, therefore he could not insure it for the full value under the subsidized federal flood insurance program.
If a house cannot be insured, you should really think long and hard about building it. If you want to take the risk, and you have the money, then take the risk. But if you take the risk and lose, don't come whining to Congress about it.
The sad thing is that this effort on Lott's part will raise the rates on everybody who owns a house in a flood plain, most of which are modest and built responsibly. These people will be soaked to subsidize the super-wealthy who have the money to build mansions on the beach.
Trent should've done his homework when he built that house. Private companies such as AIG, Chubb and Lloyds do indeed offer "extra" flood insurance which covers the value of more costly homes above the NFIP cap. Sure, that coverage isn't cheap, but Trent's a high-roller. He has no excuse for leaving himself vulnerable to that loss.