U.S. House approves flood insurance extension, but with reforms
The National Flood Insurance Program moved one step closer to a five-year extension with a 406-22 vote in the House of Representatives, though the legislation included measures that would substantially change the agency's makeup.
Authored by Illinois Representative Judy Biggert, the legislation would institute new risk-based pricing models to charge rates that accurately reflect the significant cost of insuring against flood damage. Additionally, higher-risk properties would not be eligible for certain subsidies that result in lower rates.
The legislation also lays the groundwork for future studies that would determine the feasibility of a private flood insurance market - something that currently does not exist. Standard homeowners insurance, for instance, does not cover for flood damage.
"The NFIP is too important to let lapse, and too in debt to continue without reform," said Biggert.
A private flood insurance market might relieve the NFIP's substantial debt. Because it cannot buy reinsurance in the way traditional homeowners insurance companies can, the agency is normally forced to cover major losses by borrowing from the Treasury. Government data showed that reality has put the NFIP $18 billion in debt as of June, according to the Wall Street Journal.
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