House passes overhaul of debt-ridden National Flood Insurance Program
The U.S. House on July 12 passed legislation that would extend the life of the National Flood Insurance Program for five years while also phasing out taxpayer-subsidized insurance premiums and paving the way for private companies to sell flood insurance.
Supporters say HR 1309 would shore up the finances of the flood insurance program, which is nearly $18 billion in debt, largely because of flood insurance payouts for Hurricane Katrina.
On a 406-22 vote, the House sent the Flood Insurance Reform Act of 2011 to the U.S. Senate. If the bill isn’t signed into law by Sept. 30, the flood insurance program will expire.
U.S. Rep. Judy Biggert, R-Ill., who introduced the bill, says the National Flood Insurance Program “is too important to let lapse and too in debt to continue without reform.”
Among other things, the bill would:
• Phase in premiums that more accurately reflect a property’s flood risk.
• Raise the cap on annual premium increases from 10 percent to 20 percent. Some House members fought unsuccessfully to keep the cap at 10 percent.
• Reduce federal subsidies for certain insured properties, including buildings in high-risk flood zones that experience repeated flood insurance claims.
• Link maximum coverage limits to the inflation rate.
Floridians hold 40 percent of policies
More than 5.6 million policyholders, including millions of homeowners, participate in the National Flood Insurance Program. Forty percent of the program’s policyholders are in Florida. The Federal Emergency Management Agency runs the program.
Under federal law, flood insurance is mandatory if you have a federally backed mortgage for a home or other structure in a federally designated high-risk flood zone. Standard home insurance policies and other types of property insurance don’t include coverage for floods.
The private market for flood insurance is practically non-existent. The reform bill would set the stage for more private insurers to sell flood insurance policies. “The result will be increased consumer choice and competition, and it will prevent the federal government from exponentially expanding its role in disaster insurance,” says U.S. Rep. Spencer Bachus, R-Ala., chairman of the House Financial Services Committee.
The House killed an amendment to the bill from U.S. Rep. Candice Miller, R-Mich., that would have eliminated the National Flood Insurance Program.