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National flood program needs private insurers in the game

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Sometimes it takes something akin to an emergency to get Congress' attention. That may be the case with the recent floods in the Midwest and South and the future of the National Flood Insurance Program. One can only hope so, at least.

A recap: The NFIP provides flood coverage because private insurers won't provide it for homeowners, though they do write commercial flood policies.

The NFIP is currently more than $20 billion in debt, debt run up by paying claims from 2005's Hurricane Katrina and other catastrophes. Why? Because we're talking homeowners here, and homeowners vote. So lawmakers are loathe to anger homeowners, who understandably don't want to pay the higher rates that would put the program on an actuarially sound footing.

Congress approved an effort to reform the program a few years back, but public outcry made short work of it. In fact, one of the bill's chief sponsors — Rep. Maxine Waters, D-Calif. — disavowed her own handiwork.

But the cost of the NFIP is making Congress reconsider reform. The program has to be reauthorized before Sept. 30, 2017, or it will lapse. Squabbles over the NFIP's reach, including whether an already financially shaky program should be expanded to include wind coverage, led to lapses before. Each time, the NFIP was reinstated.

Now some lawmakers are considering what should have been considered all along — how to get the private sector to play a role in the provision of flood insurance. The appetite is certainly there on the part of reinsurers, who wouldn't mind assuming some of the risk at a time when they're dealing with a flood of their own — a flood of capacity.

And it's not like the private market can't provide flood cover. For example, private insurers underwrite flood insurance in the United Kingdom, although there is a pool for some high-risk properties.

At a time when the federal debt continues to grow, any reasonable idea that would reduce debt deserves a serious hearing. Getting the private sector involved in the flood insurance market certainly counts as a reasonable idea.

The catch — and there's always a catch where a federal program's involved — is political. Even slowly allowing the private sector to get back into the flood insurance business would require considerable political will. That's because rates would be certain to rise for some policyholders, because private underwriters won't get involved if they can't make a profit.

There will probably always be some federal involvement in the flood insurance market, but every step should be taken to assure that involvement is no greater than absolutely necessary.

Congress is taking baby steps, but even baby steps are unusual in an election year as contentious as this one. Reform is critical, and one can but hope that reform including opening the door to a greater private presence in flood insurance is part of any reauthorization of the NFIP this time around.