Privatizing NFIP Could Be on Agenda After Sandy-Aid Battles
R Street Senior Fellow R.J. Lehmann responded by saying that while there will be challenges in moving to a fully private market for flood insurance, including development of appropriate underwriting and catastrophe modeling tools, flood risks already are privately insured in many other developed markets, including Australia and the United Kingdom.
“For decades, the NFIP has been offering below-market rates that have subsidized construction in risky and environmentally sensitive regions across the country,” Lehmann said. “Unwinding those distorted market signals in a way that causes minimal pain to existing home and business owners will be a challenging process, but one that is well worth exploring for the sake of both taxpayers and the environment.”
He adds, “The catastrophes we saw in 2012 should be a wake-up call that we simply can no longer afford to encourage people to live in harm’s way. We welcome Chairman Hensarling’s commitment to future flood insurance reform and would offer our own expertise for members of Congress seeking ways to make privatization a reality.”