Is debt forgiveness an option?

The National Flood Insurance Program is in debt to the tune of $24.6 billion — a problem that only the U.S. Congress can solve, stakeholders say.

Congress passed the Biggert-Waters Flood Insurance Reform Act of 2012 to strengthen the program’s fiscal soundness by addressing discounted premiums and giving the Federal Emergency Management Agency new tools to manage risk exposure. But it also passed the Homeowner Flood Insurance Affordability Act in March 2014, which repealed certain provisions of the reform legislation.

“To be very plain, given the discounts, the latest subsidies and the grandfathering that are in place today, there’s not a practical way for us to repay this debt,” Roy Wright, deputy associate administrator of the Federal Insurance and Mitigation Administration within FEMA, testified last month at a hearing of the U.S. House of Representatives’ housing and insurance subcommittee.

Any effort to forgive the debt should be combined with a program that builds a tower of coverage in which private reinsurance plays a role, but ultimately the federal government would pay for losses, said Carolyn Kousky, a fellow at nonpartisan research organization Resources for the Future in Washington. There are a lot of good arguments for forgiving the debt, she said: “They’re never, ever going to be able to pay it back with premium revenue.”