Flood Insurance Overhaul (Finally) Moves Forward…

After years of delay, Congress appears ready to move forward with an overhaul of the federal program that provides insurance to homeowners in flood-prone areas.

Senate Majority Leader Harry Reid (D., Nev.), said on the Senate floor Wednesday that lawmakers plan to vote on a much-delayed package of changes to the National Flood Insurance Program that would keep the program running for another five years.

The legislation would enact changes to the debt-strapped program to put it on a more solid financial footing by gradually raising premiums. A similar bill to do so has already passed the House.

The bill appears to have support from lawmakers in both parties, and has been pushed by the real estate and insurance industry.

The program is currently scheduled to expire next week. Mr. Reid said Senate lawmakers would move ahead with a 60-day extension of the program to give them time to hash out the details of a full five-year extension. Last week, the U.S. House voted overwhelmingly in favor of a measure keeping the program running through June 30. It is “critical that we do something on flood insurance,” Mr. Reid said. “We need to get something done on a more permanent basis.”

The flood insurance program is a federally run system that provides insurance to about 5.6 million homes and businesses.

Under the program, policies are sold and claims are managed by private insurers. The risk, however, is borne by the government. Flood insurance is required for government-backed mortgages on properties in flood-prone areas.

Lenders in areas with a high risk of flooding mandate the insurance. If the program is allowed to expire on schedule at the end of May, the fragile housing market could be harmed as many buyers would no longer be able to be approved for loans.

A lapse in the program would “really put a hiccup in the economy for no good reason,” said Sen. David Vitter (R., La.).

The flood-insurance program has been under strain since the middle of last decade, when a number of bad storms caused billions in damage and drove the program into the red. Since 2008, lawmakers have passed a number of short-term fixes but have not been able to reach an agreement on a full five-year extension of the program.

“We’re pleased that they’re moving on this but urge them not to let it slip any further,” said Matt Gannon, assistant vice president for federal affairs at the National Association of Mutual Insurance Companies. “It’s about time for action.”


By Alan Zibel

Posted on: May 25th, 2012 at 8:23pm by bwittenbaum. Filed under: National Insurance News

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