Efforts to delay reforms to the National Flood Insurance Program will put homeowners and taxpayers at greater risk and could threaten the viability of the program itself, the National Association of Mutual Insurance Companies said Tuesday.
“It’s understandable, from a political perspective, that elected officials don’t want to be seen as the reason for higher flood insurance premiums, and no one wants to see homeowners face a true hardship,” said Jimi Grande, senior vice president of federal and political affairs for NAMIC.
“At the same time, however, there are millions of policyholders who rely on the NFIP for flood insurance and who deserve a program that will be able to meet its obligations. As it stands, that cannot be said of the NFIP, which owes roughly $28 billion to the taxpayers and is why these reforms were passed in the first place. Delaying the reforms adopted under the Biggert-Waters Act means a return to the days of the NFIP needing taxpayer-funded bailouts.”
The Biggert-Waters Act was signed into law last year to create a path to financial stability for the NFIP, which faced crippling debt to the U.S. Treasury. Under the law, flood insurance premiums will move gradually to risk-based levels over a four-year period and some subsidies for coverage were eliminated. The law also provided for newer, more accurate floodplain mapping and gave greater authority to the NFIP to deal with repeatedly flooded properties.
“The reforms passed last year enabled the NFIP to start down a path toward fiscal viability. Just one year in, it doesn’t make sense to put those reforms on hold, and it especially doesn’t make sense to push it back as far as the NFIP’s next expiration date four years from now,” Grande said.
Grande said NAMIC believes that Congress could further ease the transition to risk-based rates without damaging the NFIP simply by moving from the hidden subsidy of suppressed rates to a transparent one provided to homeowners on a means-tested basis.
“With a subsidy, Congress would ensure that the NFIP would still receive much-needed premiums while helping those homeowners facing true hardship afford their coverage,” Grande said. “An open, transparent process would also have the benefit making homeowners aware of the actual risk they face and give them a chance to reduce their premiums through mitigation against future flooding.”
In NAMIC’s statement, Grande noted that many of the lawmakers who voted to extend the NFIP last year did so because of the reforms which could now be put on hold. “If reform is shown to be nothing more than empty promises, in four years those same lawmakers will be less inclined to vote to maintain the NFIP again,” he said.
Source: National Association of Mutual Insurance Companies