The Financial Services’ Housing and Insurance Subcommittee yesterday discussed the importance of implementing the Biggert-Waters Flood Insurance Reform Act without delay in order to protect taxpayers from having to continue bailing out the debt-ridden National Flood Insurance Program.

With a $24 billion debt, the National Flood Insurance Program (NFIP) cannot continue to operate on its current fiscal trajectory. Since 2006, the Government Accountability Office has labeled the NFIP a “high risk” to taxpayers, as it does not charge rates sufficient to cover its obligations and projected losses.

In response to a potential delay to implementing reform, a statement from the National Association of Mutual Insurance Companies (NAMIC) claims that “Congress can ease the transition to risk-based pricing for flood insurance without delaying the reforms required to put the National Flood Insurance Program on a path to fiscal viability.”

"Delaying the NFIP reforms passed just last year isn't solving the problem of expensive flood insurance premiums; it's just switching back to the program that couldn't sustain itself without taxpayer-funded bailouts," said Jimi Grande, SVP of federal and political affairs for NAMIC. "We should fix any affordability problems with targeted solutions rather than breaking the NFIP by delaying all of the reforms."

The Biggert-Waters Flood Insurance Reform Act of 2012 would mandate a series of reforms that the Congressional Budget Office estimates would generate a $2.7 billion increase in net income to the program over the next 10 years.

In a testimony, NAMIC outlined several steps Congress could take to help homeowners more easily afford coverage without risking the NFIP's future, which include: means-tested assistance to property owners for whom risk-based rates would create genuine hardship; low interest loans or grants to finance property owners' investment in mitigation; encouraging higher deductible flood policies; and allowing property owners to establish tax-exempt flood loss accounts to pay out-of-pocket flood costs.

"We can take steps to keep flood insurance rates affordable, but it should be done in a means-tested and transparent way; not everyone who receives flood premium subsidies needs taxpayer assistance," Grande said. "Flooding is the most common natural disaster, and homeowners should know the true risk they face from flooding. Congress can best help keep flood insurance affordable by encouraging homeowners to take steps to prevent flood damage before it happens."

The Biggert-Waters Act also seeks to encourage a greater role for the private sector in providing flood insurance coverage.

“After more than a decade in Congress, if I have learned anything, it is that the federal government does a terrible job of underwriting and pricing risk, and that has very real consequences for taxpayers who end up footing the bill for the government’s failures,” said Subcommittee Chairman Randy Neugebauer (R-TX). “Whether it is Fannie Mae, Freddie Mac, the Federal Housing Administration, Medicare, or soon to be Obamacare, the failure of the federal government to adequately price risk has piled hundreds of billions of dollars onto our $17 trillion national debt.”

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