COMMENTARY: National Flood Insurance Program is drowning in debt

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Trust Congress to take a bad situation and make it worse. The bad situation is the state of the National Flood Insurance Program. The facts are plain enough. The program is $24 billion in debt. Rates charged policyholders don't reflect actual risk and are in some cases supported by subsidies. That means odds are the program can be expected to go even deeper in debt the next time it has to respond to a major disaster. When that happens, who ultimately pays? The taxpayers, of course.

Congress' record on the NFIP generally has been less than inspiring. An effort to add windstorm coverage to the program — and remember, windstorm is already covered by the private market — led to a series of short-term reauthorizations of the NFIP. Adding windstorm was a bad idea, since it could have driven the NFIP even deeper in debt. The disagreement over expanding the program even led to some lapses before it was reinstated retroactively.

Then a funny thing happened. Not ha-ha funny, but funny in the sense of being unusual, unexpected and quite sensible. In 2012, Congress passed the Biggert-Waters Flood Insurance Reform Act. Among other things, the act called for updating the flood maps upon which rates are based and phasing in risk-based premiums while cutting back the subsidies that riddle the flood insurance program. Good sense appeared to have won a long-overdue victory.

But good sense can be fleeting, as evidenced in recent votes in the House and Senate to effectively gut Biggert-Waters. In the name of protecting policyholders, the Senate voted to put off implementing risk-based rates for four years, which is when the NFIP will have to be reauthorized again. The House voted to basically scrap new flood maps, which more accurately reflect risks than those in use, and to provide continued subsidies for some policyholders while limiting any rate increases to 18% per year. Ultimately, the Senate approved the House bill with no amendments.

These changes to the law severely limit its effectiveness. Not surprisingly, an unusual coalition of insurer, free-market and environmental groups has been outspoken in its opposition to the changes. Perhaps a bit surprising, the Obama administration — which has hardly been a paragon of opposing subsidies for such things as solar energy — also has expressed its concern over delaying risk-based rates.

Proponents of altering Biggert-Waters' rate changes have said their actions are designed to protect NFIP policyholders from disproportionate rate increases. That's no doubt true. But a look at the calendar may provide another rationale for their actions — all representatives and a third of the Senate seats are up for election in November. No incumbent wants to face angry voters. Meanwhile, the NFIP can be expected to keep taking on debt that will some day have to be repaid. If Congress repeals the central reforms contained in Biggert-Waters, short-term gain for politicians could end up as long-term pain for taxpayers.

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