“NO” on the Homeowner Flood Insurance Affordability Act of 2014
This week, the Senate will vote on the Homeowner Flood Insurance Affordability Act of 2014 (S. 1926). The bill, sponsored by Sen. Robert Menendez (D-NJ) 6%,Sen. Mary Landrieu (D-LA),Sen. Johnny Isakson (R-GA) 55% and Sen. David Vitter (R-LA) 72%, would delay the implementation of certain provisions of the Biggert-Waters Flood Insurance Reform Act of 2012.
When Congress reauthorized the National Flood Insurance Program (NFIP) in 2012, it also required the phase out of subsidies on insurance premiums so that policyholders would eventually begin paying actuarially sound rates. The innocuously named Homeowner Flood Insurance Affordability Act would delay the start of that much needed reform for four years, setting a terrible precedent that this promising reform may never be allowed to go into effect and taxpayers would be left holding the bag.
A transition to the private sector is essential for the protection of taxpayers. Flood insurance payouts have meant huge financial losses for the NFIP, which means Congress has had to borrow huge amounts of additional money from the U.S. Treasury. Indeed, as of September 30, 2013, the NFIP owed the U.S. Treasury $24 billion.
Real reforms to the NFIP are needed now, not arbitrary delays. Heritage explains homeowners should pay “the appropriate actuarial premium rather than subsidized rates” for flood insurance. They add this would “encourage insurance companies to enter the market and would set the stage for an eventual move of the entire program to the private sector.” Currently, flood insurance is provided only by the government. Subsidies allow property owners to take more risks because taxpayers are paying for their risks.
Taxpayers should not be forced to continue subsidizing high-risk development of flood-prone areas. The Biggert-Waters Flood Insurance Reform Act of 2012 increases financial accountability among homeowners and removes an undue burden on taxpayers. Its reforms should not be delayed.
Heritage Action opposes S.1926 and will include it as a vote on our legislative scorecard.