Congress Considers Flood Insurance Program’s Future

Krassi Nikov evacuated his Houston home with more than 2 feet (61 cm) of water inside it Tuesday after Tropical Storm Harvey devastated Texas’ Gulf Coast. He now plans to collect on his flood insurance for the second time this year and rebuild.

But the future of the federal-government-run flood insurance program on which Nikov, 63, and other property owners in vulnerable areas depend rests with the U.S. Congress.

National Flood Insurance Program renewal

Congress will soon be asked to renew the National Flood Insurance Program, which expires at the end of September. While a simple extension of the program has wide bipartisan support, some lawmakers are calling for broad reform.

The program had received 35,000 claims from Texas by midday Wednesday, according to Roy Wright, its administrator, who described it as a very fast pace.

Wright said he was confident Congress would reauthorize the program, but he added that the program would only be prevented from selling new policies or renewing existing ones if it were to lapse.

“It does not affect ability to accept claims,” Wright said.

Difficult battle for GOP changes

Republicans advocating changes to the program want private companies to write the policies, which they say would result in premium prices that more accurately reflect risks. Additionally, they want the U.S. government to stop charging the program interest, with the savings to be used for flood mitigation.

That could set up a difficult battle. Conservatives have voiced concerns that the insurance program has about $25 billion of debt, while Democrats say the Republicans’ plan to allow private-market plans would be more expensive for homeowners.

A bipartisan group of lawmakers from coastal states including Senators Elizabeth Warren, Democrat of Massachusetts, and Marco Rubio, Republican of Florida, have been pushing for changes to the program.

The NFIP has been reauthorized 17 times since it was created in 1968, with the last time occurring in 2012. It has been allowed to lapse four times.

Busy legislative schedule

Many lobbyists believe Congress is unlikely to attempt a sweeping reform of the program before the end of September, given a busy legislative schedule that includes approving funding to avoid a government shutdown and raising the debt ceiling.

Congress also faces pressure to pass an aid package to help the devastated Gulf Coast. Goldman Sachs said in a research note Tuesday that early estimates suggested Harvey would cost “in the range of $30 billion.”

Instead, most observers expect Congress to pass a short-term extension of the program, ranging from three months to a year.

Leaders in Congress are weighing whether to attach it to another piece of legislation, such as a continuing resolution to fund the government, according to several lobbyists following the issue.

House of Representatives Speaker Paul Ryan’s office said it was confident the program would be reauthorized.

Hensarling’s reforms

U.S. Representative Jeb Hensarling, a Republican who chairs the House Financial Services Committee, said in a Bloomberg television interview Monday that he hoped his package of reforms could gain full approval before the end of next month.

Hensarling wants to renew the program for five years if private insurers are allowed to write the flood policies.

But a business lobbyist who consults for many large American companies and follows the issue closely said Hensarling lacked the support to get his package passed by the House when Congress left for its August recess.

“I don’t think they’re at the point now where they have the votes,” the lobbyist said. He added that trying to overhaul the program would be a distraction for federal emergency officials and the flood insurance program.

“Even if there was a package of reforms ready to go, (the agencies) are not going to have the bandwidth to deal with some kind of reform package,” he said.

In a letter to Ryan and House Minority Leader Nancy Pelosi sent Monday, 100 House Democrats expressed concerns about the Hensarling package, saying they would not vote for the full package despite believing flood insurance reauthorization was crucial.

“Most of these bills do not meet the goals of affordability, availability, increased mitigation efforts or improved mapping,” the letter said.

‘Incredibly detrimental’

Jerry Howard, head of the National Home Builders Association, said the group had endorsed Hensarling’s package and was hopeful the bills would pass quickly.

Emily Naden of the Building Owners and Managers Association, which in Houston alone represents owners and managers of 312 million square feet of office space and accounts for 43,000 jobs, said the organization had been pushing for reforms but must prioritize avoiding a lapse in coverage.

“For us, we absolutely need the program to be re-upped without a lapse — a lapse is incredibly detrimental to all of our policy members,” she said.


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