Efforts to delay or repeal rate increases under the Biggert-Waters reforms to the National Flood Insurance Program (NFIP) would likely continue to increase the NFIP’s long-term burden on taxpayers.

They may also reinforce private insurers’ skepticism that they would ever be permitted to charge adequate rates and make their participation in the flood insurance market unlikely in the foreseeable future, according to a new Government Accountability Office (GAO) report.

In its analysis GAO notes that new technologies and a better understanding of flood risks may have increased private insurers’ willingness to offer flood coverage, but a key condition to their participation is the ability to charge rates that fully reflect the estimated risk of flooding.

GAO states:

As debates over the private sector’s role continue, one step to address the burden on low- and moderate-income policyholders could be taken immediately. As we have suggested previously, Congress could eliminate subsidized rates, charge full-risk rates to all policyholders, and appropriate funds for a direct means-based subsidy to eligible policyholders. The movement to full-risk rates would encourage private sector participation, and the explicit subsidy would address affordability concerns, raise awareness of the risks associated with living in harm’s way, and decrease costs to taxpayers, depending on the extent and amount of the subsidy.”

Even with increased private insurer participation in the flood insurance market, the GAO report foresees a continuing role for the federal government in the form of a residual market or NFIP reinsurer.

Insurance Journal has more on this story.

Check out this USA Today article on latest Congressional action to delay new flood insurance premiums.

Also check out I.I.I. facts and statistics on flood insurance.