Legislative proposals to reform the National Flood Insurance Program (NFIP) were once again up for debate at a hearing before the U.S. House Financial Services Subcommittee on Housing and Community Opportunity yesterday. The NFIP recently was granted another temporary extension until May 31. The renewal is retroactive to March 28, covering the more than two-week period (March 28-April 15) when Congressional inaction effectively allowed the program to lapse. In testimony at yesterdayÃ¢â‚¬â„¢s hearing, Orice Williams Brown, of the Government Accountability Office (GAO) noted that the NFIP is not actuarially sound. Key points made by GAO are:
- While NFIPÃ¢â‚¬â„¢s financial condition has improved slightly due to an increase in the number of policyholders and moderate flood losses, it is unlikely to pay off its full $18.8 billion debt, especially if it faces catastrophic loss years.
- Many property owners are paying premium rates that do not reflect the full, long-term risk of flooding. Almost 25 percent of property owners pay subsidized premium rates, and even Ã¢â‚¬Å“full-riskÃ¢â‚¬ premium rates may not reflect the actual risk of flooding.
- NFIP cannot deny insurance on the basis of frequent losses and thus provides policies for repetitive loss properties, which represent only 1 percent of policies, account for 25 to 30 percent of claims.
For further coverage of the hearing, check out an article inÃ‚ the Biloxi Gulfport Sun Herald by Anita Lee. Check out I.I.I. information on flood insurance.