This is a thorough review of the key problems with NFIP, starting with its inception, before flood maps were available. Rate deficiency and adverse selection through subsidies that Congress dares not end, along with subsidies in the worst zones are identified by the author. Then, he continues with effects of Congressional inertia that perpetuates the annual deficit, debt, and now – interest payments that don’t allow the debt to be paid down.
The $2 Billion of expenses in the $5.7 Billion of annual NFIP premiums (revenue?) seem high, and are likely to be reduced in a private market that could end the NFIP, once and for all. The reinsurance arrangements are difficult to assess without details, but there might be more efficient reinsurance programs if the private market took back the exposures that would be reduced through greater mitigation efforts.
At some point, some politician(s) are going to properly address this boondoggle and revert the risk back to the private insurance market. In turn, that will eventually force risks to pay equitable rates or relocate, causing housing market problems in coastal areas with housing values inflated by the ‘hidden’ subsidies from NFIP. Reversion back to proper housing values will be painful for those who previously benefited, but fair to those who previously subsidized ‘coastal property pirates’.
This is a thorough review of the key problems with NFIP, starting with its inception, before flood maps were available. Rate deficiency and adverse selection through subsidies that Congress dares not end, along with subsidies in the worst zones are identified by the author. Then, he continues with effects of Congressional inertia that perpetuates the annual deficit, debt, and now – interest payments that don’t allow the debt to be paid down.
The $2 Billion of expenses in the $5.7 Billion of annual NFIP premiums (revenue?) seem high, and are likely to be reduced in a private market that could end the NFIP, once and for all. The reinsurance arrangements are difficult to assess without details, but there might be more efficient reinsurance programs if the private market took back the exposures that would be reduced through greater mitigation efforts.
At some point, some politician(s) are going to properly address this boondoggle and revert the risk back to the private insurance market. In turn, that will eventually force risks to pay equitable rates or relocate, causing housing market problems in coastal areas with housing values inflated by the ‘hidden’ subsidies from NFIP. Reversion back to proper housing values will be painful for those who previously benefited, but fair to those who previously subsidized ‘coastal property pirates’.
I agree with the above sentiment.