WASHINGTON (Feb. 12, 2018) – The R Street Institute welcomes provisions of the White House’s Fiscal Year 2019 budget that call for structural reforms to the National Flood Insurance Program, which in recent years has had to borrow more than $40 billion from federal taxpayers to meet its claims.
The just-released budget reiterates the administration’s support for a set of reforms first proposed in October 2018 by Office and Management and Budget Director Mick Mulvaney that “would ensure the continued financial stability of the NFIP while maintaining affordability for low-income policyholders, and expand the private market to get the federal government out of the flood insurance business.”
Under Mulvaney’s proposal, the Federal Emergency Management Agency would have authority to discontinue NFIP coverage for extreme repetitive loss properties following future losses. Starting in 2021, the program also would phase out coverage for commercial properties altogether, while no policies could be written for new construction inside a special flood hazard area.
“The White House proposals are in line with those proposed by R Street, as well as those approved by the U.S. House in November with the passage of H.R. 2874,” R Street Director of Finance, Insurance and Trade Policy R.J. Lehmann said. “We again encourage the U.S. Senate to move quickly and decisively to take up comprehensive flood insurance reform before the scheduled March 23 lapse of the program’s statutory authority.”
The budget document also notes the success of FEMA’s $1 billion reinsurance program in 2017, which returned $7 for every $1 invested, and it lays out the cost of a proposal to extend flood insurance premium subsidies to households that earn less than 80 percent of area median income, while phasing out existing subsidies tied to a property’s age.
According to FEMA estimates, roughly 26 percent of NFIP policyholders in special flood hazard areas and 21 percent of those outside those areas would qualify for income-based subsidies. The White House estimates the program would add about $434 million to the deficit over the next decade.