The Economic Policy subcommittee of the U.S. Senate Banking Committee held a hearing on May 9 to examine some of the issues in the area of flood insurance. With the National Flood Insurance Program currently scheduled to expire before June, some committee members called on their fellow legislators to take prompt action both to reform the program and to reauthorize it for the long haul. The program has provided important benefits and safeguards against property damage to homes in Florida and elsewhere in the country.
One Senator noted that past lapses in the flood insurance program's availability had been destructive and unproductive, leaving many property owners in the lurch without needed coverage. Another urged his colleagues not to treat the program as a partisan issue, but one of economic importance for the country which should receive bipartisan support.
A number of insurance and real estate industry experts testified before the committee. One insurance industry spokesman stated that the 5.6 million people currently benefited by the program are increasingly frustrated with the way in which Congress has repeatedly granted only short-term extensions of the program, doing so an even dozen times since the fall of 2008. This resulted in gaps in coverage from time to time, including four separate occasions in 2010.
The flood insurance program currently has a $17.2 billion debt shortfall, which has been on the books since 2005. Consumers currently receive insurance through the program at approximately one-third the price of comparable private flood insurance premiums. Some suggested that this level of government subsidy renders the program financially unsustainable in the long term and needs to be reformed. Currently, budget figures revealed, the program has an annual deficit estimated at $1.3 billion.
The Senate should make a decision between short-term renewal and long-term reform before Memorial Day.
Source: Insurance Journal, "Flood Insurance Hearing Held in Washington," May 9, 2012