The National Flood Insurance Program (NFIP) is in debt to the American tax payer to the tune of $18 billion. Congress is considering forgiving the debt and they approved a six-month program extension to discuss this option.
Forgiving the debt, which amounts to another ill-advised bailout, is but one problem; ignored is the fact that the debt does not necessarily add up. Between 1990 and 2007, the NFIP collected over $28 billion in premiums. During the same period it paid out just over $30 billion in claims; a difference of less than $2 billion.
Assuming 30 percent for operating costs ($8.4 billion), the debt calculates out at just over $10 billion. Where is the other $8 billion?
MyNewMarkets.com has posted, “Fixing the NFIP – The Most Inefficient Insurer in the World” on their website exploring this gap and the underlying causes in much greater detail. Additional posts will offer an option to the current plan.
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