As NFIP faces deepening debt, some call for more subsidies and lower rates
In commenting on the New Jersey Senate resolution, R.J. Lehmann, a senior fellow at the R Street Institute, calls the resolution a “self parody.”
“The NFIP has been offering overly generous subsidies to residents of flood-prone regions for more than 45 years, and the roughly 1 percent of policyholders who suffer ‘repetitive losses,’ (90 percent of whom were paying deeply discounted ‘grandfathered’ rates, have accounted for more than a third of all the program’s claims,” Lehmann says.
The result of the subsidies, Lehmann explains, “which the N.J. Senate apparently would like to see expanded, has been nothing but environmental catastrophe and financial ruin. To put it frankly, the NFIP is flat-broke, and has been ever since 2005, when Hurricanes Katrina, Rita and Wilma forced it borrow more than $19 billion from the U.S. Treasury just to pay its claims.”
Lehmann says there was little chance the program ever would be able to pay down that debt, and what little progress it did make was quickly erased by Hurricanes Ike in 2008 and Irene in 2011.
“But with claims still coming in from last year’s Superstorm Sandy, whatever hope may once have existed of the NFIP returning to fiscal sustainability has long since been swept away,” Lehmann notes. “When all is said and done, the Sandy claims are expected to put the program more than $30 billion in the hole, with no hope of ever digging itself back out.”