11/23/17 – Flood Insurance

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Recent hurricane-related floods highlight needed reforms in Washington.

Here’s what’s happening behind the headlines.

FEMA provides disaster assistance including money to a homeowner following a flood.  But payments are capped.

The National Flood Insurance Program offers government-backed insurance in flood-prone communities provided plans to reduce or mitigate against flood damage are in place. The NFIP identifies communities at higher risk of flooding.

In about the last 40 years, the program’s paid more than $50 billion to settle insurance claims.  Unfortunately, the program is not financially self-sustaining.  Premium rates do not reflect the full-risk of loss. The program’s borrowed $25 billion from the U.S. Treasury.

And next month it will expire if not reauthorized.

The GAO identified program shortfalls that should be addressed such as debt relief; premium affordability; the private insurance market; and consumer participation.

The House passed legislation that includes needed changes including: disclosure of a property’s history and risk of flooding; encouraging private insurance participation; improved flood mitigation policies; and financially-sound premiums.  Also, multiple-loss properties – those that have received a disproportionate share of claims payments over time – would be charged higher premiums.

The Senate should add an improved flood-risk mitigation provision.  According to the Pew Charitable Trusts, every dollar spent on mitigation saves four dollars in future losses.

[h/t Pew Charitable Trusts]

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