What to Do with the National Flood Insurance Program
The Biggert-Waters Flood Insurance Reform Act of 2012, signed into law last year, was designed to provide relief to taxpayers, already burdened with $17 trillion in debt, by enacting commonsense reforms to the flawed National Flood Insurance Program (NFIP) and transitioning flood insurance to the private sector. The law phases out flood insurance subsidies and sets premium rates to be paid by property owners that reflect the actual risk of flood damage.
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.
Unfortunately, some lawmakers are seeking to delay implementation of the flood insurance reforms and to allow the taxpayer funded subsidies to continue for an additional year. Legislation sponsored by Rep. Bill Cassidy (R-LA) 50%, the Flood Insurance Relief and Transparency Act, would extend the subsidies until March 2015.
This is the wrong approach — reforms to the NFIP are needed now. 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.