After unanimously passing through the Senate Banking Committee on Sept. 8, the Flood Insurance Reform Act of 2011 is one step closer to helping the 5.6 million Americans in 21,000 communities who rely on the National Flood Insurance Program (NFIP) to protect their homes from flood damage. But with differences between House and Senate bills to iron out, a short-term extension of the NFIP through Nov. 18 may be needed since the program expires on Sept. 30.
It’s important that Congress get the extra time to hash out those differences, so the policy can be extended for a full 5 years.
Any flood insurance lapse would put home owners at risk. There’s no private market flood solution except for homes valued at more than $1 million, according to the General Accountability Office. Most owners in participating communities pay a risk-based premium to insure their properties and to keep taxpayers off the hook.
Senate version of flood insurance bill
The Senate bill takes three major steps toward ensuring the fiscal continuity of the NFIP for years to come:
- Extends NFIP through 2016.
- Phases out over 4 years subsidized insurance premium rates paid by policyholders of properties built before 1974 or properties built after that but before the flood map for the area was implemented. (These properties represent less than 25% of the NFIP pool.) By the way, on average, premiums charged for subsidized policies are about 35% to 40% of their full risk level, according to FEMA.
- Permits NFIP to increase rates by up to 15% per year to accurately assess the actual risk of flooding in some areas.
- H.R. 1309, which passed before the August recess, allows premium rates to increase by as much as 20% per year.
- Phases out the older-property subsidies over 5 rather than 4 years.
- Makes business interruption and additional living expenses coverage available, whereas the Senate bill just adds a provision to study that additional coverage.
The clock is ticking. Fortunately, barring any more earthquakes or hurricanes hitting the nation’s capitol, the short-term extension is expected to be on President Obama’s desk as part of a continuing budget resolution before the end of the month.