NATIONAL FLOOD INSURANCE PROGRAM REMAINS ON CONGRESS’ TO- DO LIST
The House passed (406-22) legislation reauthorizing the National Flood Insurance Program (NFIP) until September 30, 2016. The NFIP has come under for carrying over $17.75 billion in debt from Hurricanes Katrina and Rita; and listed by the Government Accounting Office as one of the programs with the highest risk of fraud, waste, and abuse. The House Bill limits NFIP’s borrowing authority to $1.5 billion, FEMA’s management to not more than 10% of the flood policies in force, allowing FEMA to decline future transfers of policies to NFIP. FEMA is also required to set up a reserve fund aimed at ensuring that NFIP has the ability to pay off losses during heavy flood periods.
Senators Johnson (D-S.D.) and Shelby (R-Al.) circulated draft legislation last weekend for the Senate to begin working on. The draft would phase out subsidies and forgive the program’s current debt. It also includes a maximum two-year phase in of actuarial rates. All new policies would be priced at actuarial rates as of the date of enactment. It also gives FEMA greater leeway in setting rates and authority to raise rates 15% annually. The draft does not add additional living expenses or business interruption. But, the draft does allow policyholders to pay their premiums in monthly installments instead of the lump-sum annual payment FEMA currently requires. The Senate Banking Committee is expected to send out a bill this week.