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Stop me if you've heard this before: Congress has once again approved a 60-day extension of the National Flood Insurance Program, or NFIP, which was set to expire at midnight on May 31.
In this latest round of the longest-running game of kick the can on Capitol Hill, the House agreed to extend NFIP with one added policy provision that would gradually remove premium rate subsidies for flood coverage on second homes and vacation homes. Sen. Tom Coburn, R-Okla., who sponsored the provision, says the move could save NFIP $2.7 billion over 10 years.
In exchange, the Senate agreed to bring to the floor a companion bill to the Flood Insurance Reform and Modernization Act passed by the House last summer that would reform and extend NFIP for five years. Rep. Judy Biggert, R-Ill., chair of the House Financial Services subcommittee on insurance, says Senate leaders have vowed to vote on a long-term extension in June.
The latest reprieve marks the 17th time that lawmakers have extended the financially foundering program since 2008. Each time a deadline approaches, it threatens to disrupt real estate sales and refinancing in designated floodplains where mortgages can't close without valid flood insurance.
NFIP was created in 1968 to help fill the gap left when private insurers withdrew from the flood insurance market. It remained largely self-supporting until 2005, when it was overwhelmed with claims from hurricanes Katrina and Rita, which hit less than a month apart.
Since then, Congress has wrestled with ways to fix the flaws in the flood program, which is not structured to do things that most insurance companies do to mitigate risk, such as build a surplus fund or purchase reinsurance to cover catastrophic losses.
NFIP, which insures 5.7 million policyholders and collects roughly $2.3 billion in premiums each year, currently owes the U.S. Treasury $18 billion.
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