GAO Report Warns of Risks in Delaying NFIP Rate Increases
The Government Accountability Office (GAO) has issued a report outlining strategies for increasing private-sector involvement in the flood insurance market. The GAO said that while legislation designed to delay rate increases for some National Flood Insurance Program (NFIP) policyholders may help to make flood insurance more affordable in the near term, it would also “delay addressing NFIP’s burden on taxpayers.”
The GAO report said Congress could help to increase private market interest in offering flood insurance products by eliminating subsidized rates and providing funding for a direct means-based subsidy to some policyholders. That would help to bring NFIP rates closer to the rates the industry would need to charge to cover the full risk of flood losses. But the report said it would also likely result in significantly higher rates for policyholders. The GAO report comes out after Congress passed an omnibus spending bill that included a provision to delay until the end of this fiscal year an estimated one quarter of flood insurance premium increases triggered by the Biggert-Waters Flood Insurance Reform Act of 2012 (BW-12).
Congress is debating broader legislation that would delay most of the increases resulting from BW-12 for four years. On January 27, a Senate cloture vote on the bill passed 83-13. Shortly after that, the White House issued a statement that failed to endorse the legislation, but urged relief for economically distressed homeowners. House Speaker John Boehner previously indicated that will not consider a four-year delay in flood insurance reforms and premium increases. However, Boehner said the House may consider some flood insurance changes “in the weeks and months ahead that both help homeowners and protect taxpayers.” Meanwhile, Sen. Pat Toomey (R-Pa.) has offered an alternative bill in the Senate that provides for a gradual phase-in of higher rates.