Senate Prepares to Roll Back Flood Insurance Reforms

A funny thing happened in 2012, Congress actually passed a bill that intentionally cut subsidies.  In this case subsidies given to homeowners under the National Flood Insurance Program (NFIP).  The Biggert-Waters Act of 2012, if fully implemented, would eliminate almost half of the annual billion in estimated subsidies under the NFIP.  Now before your opinion of Congress suddenly improves, its important to remember that subsidies reductions were done only because the NFIP had expired and some responsible members objected to extending the program without reform.  Now that the program is up and running again, beach front homeowners and their friends in the real estate industry want their subsidies back.

The Senate is currently moving towards that goal.  Not even wanting to bother with the normal process of hearings and a Committee vote, Senate Majority Leader Harry Reid has brought S.1926 directly to the floor for a vote, likely to occur this week.  S.1926 would indefinitely delay the premium increases passed in Waters-Biggert, effectively hitting the taxpayer for $100s of millions annually.  But hey there’s a close Senate race going on it Louisiana, so regular order can wait.

Now I have every sympathy for households facing rate increases under NFIP.  They’ve been getting a subsidy for years and have grown used to it.  Given the sometimes high cost of NFIP, it might not even feel like a subsidy.  But then part of that is because almost a third of the premium income is pocketed by the insurance companies (at no risk to them I might add).  The solution is to let those households either get out of NFIP altogether or to purchase private insurance, that would likely be cheaper given the inefficiencies of the NFIP.  If one feels that maintaining flood coverage is vital for these households, yet they cannot bear the higher raters, another option would be a significantly higher deductible.  Rolling back the premium reforms in Biggert-Waters is simply short-sighted and irresponsible, but then that’s nothing new for Washington.