In a briefing today with interested parties, the Senate Banking Committee’s chairman and ranking member confirmed that Senate Majority Leader Harry Reid, D-Nev., and Minority Leader Mitch McConnell, R-Ky., have agreed to a deal that will allow flood insurance reform legislation to proceed this week as an attachment to the transportation conference report. (The flood insurance section starts on page 521.)
The five-year reauthorization tracks closely to the Senate’s version of legislation to reform the National Flood Insurance Program. It would phase-out subsidized premiums for second homes, commercial properties and properties subject to severe repetitive loss over a roughly four-year period, with rates for those properties rising 25% per year until they reach actuarially indicated levels.
The bill also strengthens the Federal Emergency Management Agency’s mitigation programs, requires the NFIP to complete its project to update flood insurance rate maps, directs the flood program to build a catastrophe reserve for large flood events and requests that FEMA explore the option of using private reinsurance or catastrophe bonds to shore up the program’s finances. The NFIP remains nearly $18 billion in debt to the U.S. Treasury, most of it accrued during the record 2005 hurricane season.
With the conference report set to be voted on by both houses in the immediate future, this marks a victory eight years in the making for taxpayer, environmental and free-market groups that long have advocated significant reforms to the flood program. While the final bill doesn’t go as far as we would like in moving more of the risk to the private sector, it represents a significant step forward in reducing wasteful and environmentally destructive subsidies for development in flood-prone areas.
UPDATE: It now appears that Section 107 of the bill, which dealt with the residual risk of properties behind levees and other flood control structures, has been excised entirely. This would preserve the status quo that the NFIP assumes that levees will never fail. R Street and Taxpayers for Common Sense had urged the Senate to preserve the residual risk language in the existing bill.