In one of its overlooked bipartisan accomplishments last session, Congress, with backing from the insurance industry, managed to approve changes to the National Flood Insurance Program (NFIP) that should help put the debt-ridden program on firmer financial ground.
The measure Congress passed in July promises to phase-in changes over five years to reduce the NFIP’s $18 billion debt. It calls for updated flood risk maps, higher premiums for those in high risk area areas, reduced premium subsidies for vacation homes, and other changes to encourage more private flood insurance. The bill passed the Republican-controlled House 406-22.
Now, before the reforms have had time to bear fruit, the government program is having to respond to Superstorm Sandy. Flood insurance claims from Sandy could very well exceed the $3.7 billion that the NFIP is currently authorized to spend.
Early estimates were that NFIP might get about 80,000 Sandy claims. For less destructive Hurricane Irene, the average claim was about $30,000, according to officials. If that holds true for Sandy, it would mean more than $4 billion in flood claims.
This scenario would drain NFIP’s coffers and leave it short of funds for any future storms, whether in the northeast, southeast or other region.
If the Sandy claims into NFIP do go over $3.7 billion, Congress will have to step in to authorize additional funds.
Sandy shows how important it was for Congress to at least do what it did last session on the NFIP. But can a still-divided Congress get its act together to once again address the issue so NFIP can honor its contracts?
To complicate the task, Rep. Judy Biggert, R-Ill., chair of the House Financial Services subcommittee that deals with insurance issues, lost her bid for re-election. Biggert was instrumental in forging bipartisan support for flood insurance reform.
Perhaps lawmakers will be more willing to increase NFIP funding knowing that reforms are on the way thanks to Biggert’s efforts last session.
If it does re-enter the flood insurance waters in this next session, Congress might do more than simply authorize additional funds. It has an opportunity to require even more property owners in vulnerable areas to buy flood policies and mandate that at-risk communities take mitigation seriously.
Sandy should be a reminder that further expanding insurance and further restricting building and rebuilding in risky areas are preferable to having the NFIP borrow and the federal government loan more money every time a storm strikes.