Long hobbled by shaky finances and intermittent funding the
Now with the clock on the program’s finances once again ticking, the Senate Committee on Banking, Housing, and Urban Affairs took up the issue in a hearing today.
In submitted testimony, the
Among the specific changes necessary for a meaningful long-term extension of the program, AIA said, were movement toward risk-based premiums, a reduction in price subsidies and an increase in coverage limits that have not changed in more than 15 years. AIA said the moves are necessary to help increase program capacity and encouraging mitigation by consumers
“The NFIP must ensure that premiums for coverage reflect the true costs to taxpayers so that flood loss subsidies can be eliminated over time,” the testimony states. “Understanding that this could cause significant hardship for those who cannot afford true risk-based premium payments, a possible solution is a government premium subsidy that could be provided outside of the NFIP.”
Chad Berginnis, associate director, the
“The Association of State Floodplain Managers concludes that the NFIP has been successful in meeting a number of its original objectives, but less so in reducing total flood losses in the nation,” Berginnis said. “The statute does mandate lenders to require certain borrowers to obtain flood insurance, sparing taxpayers from paying many millions of dollars in disaster relief and casualty loss deductions, and enabling those citizens with flood insurance to more fully restore their lives to normalcy after a disaster. Additionally, the NFIP has prevented some unwise development and promoted flood hazard mitigation through local adoption of floodplain management ordinances. On the other hand, too many Americans continue to build in at-risk locations, including residual risk areas behind flood control structures and high risk coastal areas. Thus collective flood losses for the nation continue to increase in real dollars. In the first decade of this century, average yearly flood losses have increased from $6 billion to $10 billion."
AIA testified that the NFIP began for a very simple reason: an affordable private market did not exist. “The NFIP arose from the simple fact that prior to 1968, for all practical purposes, flood insurance that was both actuarially sound and affordable was unavailable to the home-owning public because it was subject to such acute adverse selection (only those who need it would purchase it). Indeed, long before the creation of the NFIP, private insurers had effectively stopped providing flood coverage.”
