The National Flood Insurance is in dire need of reform, facing massive deficits and systemic risk issues. Despite these growing problems, legislators have paid it little attention, kicking the can down the road with short term extensions. The NFIP has not seen a long term reauthorization since 2008, when its last long term authorization expired. Since then, NFIP has survived through short term reauthorizations; the most recent came in December of 2011, with President Obama signing a temporary reauthorization until May 31, 2012.
While originally designed to be self-sustaining, the NFIP currently owes the Treasury more than $18 billion and has no practical way to ever pay it back. In addition, while many of the program’s founders promoted it as a way to promote wetlands conservation, it has, in fact, provided a subsidy for the development of wetland areas.
For the first time in years, real progress towards a long term reauthorization of NFIP with reforms to stabilize its finances and address the issue of repetitive loss properties is now being considered in Congress. One proposal, supported by Sen. David Vitter (R-LA) and Sen. Jon Tester (D-MT) would take steps to address several of these issues while creating a long term extension of NFIP.
In a op-ed published February 16 in Roll Call, Senators Vitter and Tester argue that an extension of the NFIP is necessary with added reforms to place it on better financial footing.
From Roll Call:
“The program is currently in an $18 billion hole, mostly because of claims paid out after major hurricanes, including Katrina and Rita, caused damage on an unprecedented scale. The House and Senate bills would take steps to address that shortfall, including a gradual increase in premiums on certain high-risk properties.
We’re working together to ensure that whatever the final bill looks like, it does two specific things. The bill should return the Army Corps of Engineers to its traditional role in levee certification, and, consistent with warnings from the Government Accountability Office, it must not increase premiums so sharply that homeowners are discouraged from purchasing flood insurance. The goal is to make the NFIP as sound as possible, for as many folks as possible, for as long as possible.”