NU Online News Service, Sept. 19, 2:39 p.m. EDT
WASHINGTON—In his deficit-reduction proposal, President Obama voices support for provisions in House legislation that would eliminate subsidies, over five years, on 30 percent of properties insured by the National Flood Insurance Program.
Legislation pending before the Senate would accelerate the end of subsidies by ending them over four years. The Senate Banking Committee passed its bill Sept. 8 and it is now awaiting Senate floor action.
Ben McKay, senior vice president of federal government relations for the Property Casualty Insurers Association of America (PCI), says, “We are pleased that President Obama included critical NFIP reforms in his deficit-reduction proposal to Congress.”
He says the president identified the NFIP as a key federal program that can contribute to deficit reduction, and reiterated his support for H.R. 1309, the House legislation that garnered overwhelming bipartisan support in July.
“The president's plan calls for the NFIP to charge actuarially sound rates to address the program's staggering debt,” McKay says.
Noting that the NFIP currently operates as a public-private partnership, McKay says, “Moving forward, we must also identify opportunities to keep as many private-sector insurance jobs as possible and prevent the expansion of the federal government's role in administering flood insurance.”
Friday, industry officials said Senate officials have made commitments that legislation will be passed by the Senate and reconciled with the House bill so as to ensure legislation reforming and extending the NFIP will be completed by Nov. 18.
The proposals to support cuts in subsidies to the NFIP were included in a televised speech and in documents the president forwarded to Congress today.
The documents detail more than $3 trillion in net deficit reduction over the next 10 years.
Combined with the approximately $1 trillion in savings from the first part of the Budget Control Act, this would generate more than $4 trillion in deficit reduction over the next decade.
It would also be used to finance the president’s plan for tax cuts and budget increases designed to create more jobs.
The House proposal supported by the president would increase premiums over five years for a subset of subsidized properties: non-residential or non-primary residences, residences sold to new owners, and severe repetitive-loss properties.
According to The President’s Plan for Economic Growth and Deficit Reduction, currently 1.2 million or 20 percent of all NFIP properties are charged premiums well below the actuarial value of the insured liability.
On average, (including subsidized and unsubsidized policies) NFIP premium collections cover approximately 70 percent of the actuarial value of the insured liability, the document says.
Other provisions of H.R. 1309 for which the president voiced support include redefining severe repetitive loss properties as residences with at least four paid claims greater than $5,000, or two paid claims that cumulatively exceed the market value of the house.
The president says he supports provisions of the bill that, one year after enactment, increase premiums for all policyholders fitting the designated categories—non-residential or non-primary residences, residences sold to new owners, and severe repetitive loss properties—by no more than 20 percent per year until the amount collected covers the full-expected cost of the insurance.
Obama says in the document that the administration also supports other measures in H.R.1309 that would increase the maximum policy coverage for structure and contents and authorize studies and pilots to test alternative approaches to flood insurance that are sustainable and cost-effective.
He estimates that under the proposed revisions included in H.R. 1309, the NFIP would collect about $700 million in additional premium revenue over five years.
The Senate bill is similar.