WASHINGTON (July 18, 2017) – With reauthorization of the National Flood Insurance Program on the horizon, the R Street Institute is deeply disappointed that reform legislation set to be taken up by the Senate Banking Committee lacks provisions that would allow private flood insurance to compete on a level playing field with the NFIP.
While the National Flood Insurance Program Reauthorization Act of 2017 makes important improvements to mapping and mitigation efforts, it unfortunately leaves the program on its current path of fiscal unsustainability and traps at-risk homeowners in the failing program. Without significant improvements in the base text, R Street would oppose the bill and its six-year reauthorization of the NFIP.
“The NFIP is $25 billion in debt to American taxpayers and runs an average loss of $1.1 billion every year,” said R Street Senior Fellow R.J. Lehmann. “It is unsustainable in its current form and it is time that Congress take reasonable steps to begin to transition to a system that relies more heavily on private coverage.”
Small technical changes like those proposed by Sens. Dean Heller and Jon Tester in the Flood Insurance Market Parity and Modernization Act would clarify that private flood insurance qualifies for lending requirements and that privately insured policyholders have continuous coverage. Such language, which passed the U.S. House unanimously last year, is essential to any responsible reauthorization, Lehmann said.
In addition, Lehmann said the Senate bill should further encourage the bourgeoning private flood insurance market by lifting the noncompete clause that currently prevents Write Your Own insurers from separately offering private policies, and that the Federal Emergency Management Agency should make detailed property-level claims and underwriting data available to private insurers and reinsurers.
“Research shows that between 62 and 88 percent of NFIP policyholders in the highest-risk V zones in Florida, Louisiana and Texas would see lower rates in the private flood insurance market,” Lehmann said. “As written, the Banking Committee draft is bad for those consumers, and for taxpayers overall.”
R Street is a nonprofit, nonpartisan public policy research organization whose mission is to promote free markets and limited, effective government. It has headquarters in Washington, D.C. and five regional offices across the country. Its website is www.rstreet.org.
Image by asalaa7777