The House of Representative has approved a bill to reauthorize the federal flood insurance program (NFIP) for another 5 years taking it into 2016. It will go before Obama in September for his signature. It changes a few things to hopefully improve its financial operations. The National Flood Insurance Program, NFIP, currently operates with a debt of nearly $18 billion and is administered by FEMA, Federal Emergency Management Agency. The bipartisan bill passed by a vote of 406 to 22.
The bill will phase in risk based premiums and phase out taxpayer subsidized rates for certain properties, including high risk buildings with repeat claims that haven’t done much to mitigate losses. It will index maximum coverage limits for inflation and raise the annual cap for raising premiums from 10% to 20%. FEMA could utilize the private reinsurance market while lowering the exposure of taxpayer dollars.
From what I read it doesn’t sound too bad. I don’t think rates are going to go down for high risk areas and properties with repeat claims. But the government can’t be expected to hold the bag forever. There were a few representatives that wanted to get rid of the flood insurance program all together. You can’t have it both ways. If you want the government to stop operating with such a massive debt it needs to change the way it operates. The National Flood Insurance Program has been criticized for having prices too low compared to the risks involved. Meaning they weren’t taking in enough money to pay their losses and it was costing the taxpayer.
Some stats I swiped from the Insurance Journal:
State Auto Financial Corp said 2nd quarter numbers will include between $155 and $165 million in pre tax catastrophe losses related to storm activity.
Allstate states their 2nd quarter pre tax estimated catastrophe losses are around $2.3 billion.