Lehrer: Flood Reform Debate a Test of Congress' Ability to Fix Larger Fiscal Ills

The president of a conservative think tank is highly critical of the current effort to roll back flood insurance rate increases imposed through a 2012 law, saying the reforms were “modest” and a test of whether federal legislators have the political will “to put its fiscal house in order.”

The comments by Eli Lehrer of the R Street Institute, a think tank based in Washington, will be appearing in the Dec. 16th issue of the Weekly Standard.

He is commenting on legislation now being considered by the Senate that would defer the imposition of actuarial rate hikes imposed by a 2012 law while Congress and the executive branch complete an affordability study.

And, a Federal Court in Gulfport, Miss., is considering a request for an injunction that would delay implementation of the rate hikes until the affordability study mandated by the law is completed.

Lehrer said in his comments said that, on balance, the reforms “are incredibly modest.”

Lehrer said that more than half of the properties most at risk won't see rate increases even if all of the reforms go into force. He said, “The private sector's role in flood insurance for homeowners will grow only slightly,” adding that anyone “looking to privatize flood coverage in a serious way will have to make further reforms” when authorization of the National Flood Insurance Program runs out in in 2017.

Still, Lehrer said, each year that subsidies for development in flood-prone areas continue, more people will move into harm's way. “As the backlash to the reforms demonstrates, once they are there, it is beyond difficult to get them out,” Lehrer said.

He said that “this has very real human costs” because undoing even a modest phase-out of flood-insurance subsidies “almost surely would mean plucking more people off of roofs with helicopters during the next massive flood or seeing more of them perish.”

And, Lehrer said “things appear certain to get worse. Ocean levels have been rising for at least 10,000 years, and climate change may accelerate this process in the future.”

Moreover, Lehrer said the real problem isn’t the flood-insurance program itself because the NFIP’s $25 billion in unpayable debt “isn’t a fiscal calamity in the context of a $3.5 trillion a year budget.

“But Congress' seeming inability to stick with modest reforms—even when they produce far more winners than losers—proves how hard it is for the federal government to do anything that improves the nation's finances,” Lehrer said. “If members of Congress can't save flood-insurance reform, it's hard to believe they'll ever be able to fix far larger fiscal ills,” he said.

At the moment, the Senate is considering whether to add S. 1610, the Homeowner Flood Insurance Affordability Act, as an amendment to S. 1867, the National Defense Reauthorization Act. The Senate will begin taking that bill up Monday, and the Senate leadership is considering whether to add S. 1610 as one of perhaps 30 proposed amendments to the bill. It is must-do legislation with strong bipartisan support.

That is not to say that Lehrer doesn’t think that the bill could be modestly changed.

“A handful of people of modest means who are unexpectedly remapped into much higher risk areas may be socked with larger bills they can't afford to pay and should probably get some temporary relief as long as they occupy their homes,” Lehrer said.

More seriously, he said, a longstanding rate-setting practice of ignoring levees that don’t provide protection against 100-year floods has resulted in some people behind "decertified" or "uncertified" levees being charged much higher rates than they should be. Lehrer noted that developers and others blocked an effort to fix this, because it would have also required more of those behind the levees to purchase coverage.

“Other broader changes—even rate freezes for people of modest means who own their own homes—probably should be part of a negotiation,” he said.

Comments

Resource Center

View All »

Get $100 in leads with $0 down!

NetQuote's detailed, real-time leads have boosted sales for thousands of successful local agents across the...

The Growing Role of Excess & Surplus Lines in Today’s...

The excess and surplus market (E&S) provides coverage when standard insurance carriers cannot or will...

Increase Sales Conversion with this Complimentary White Paper

This whitepaper will share proven techniques - used by many of the industry's top producers...

D&O Policy Definitions: Don't Overlook These Critical Terms

Unlike other forms of insurance where standard policy language prevails, with D&O policies, even seemingly...

Environmental Risk: Lessons Learned from Willy Wonka and the Chocolate...

Whether it’s a chocolate factory or an industrial wastewater treatment facility, cleanup and impacts to...

More Data, Earlier: The Value of Incorporating Data and Analytics...

Incorporating more data earlier in claims lifecycles can help you reduce severity payments by 25%*...

How Many Of Your Clients Are At Risk Of Flood?

Every home is vulnerable to flooding. Learn four compelling reasons why discussing flood insurance with...

Gauging your Business Intelligence Analytics Capabilities and the Impact of...

Big Data, Data Lakes and Data Swamps, How to gauge your company's Big Data readiness....

Extending Contact Center Capabilities Across the Insurance Enterprise

Today advancements in technology are making a big impact on business and society. To yield...

Drug and Alcohol Testing Requirements

In this two-part series, NBIS Risk Management team will break down the requirements to assist...

Looking for Markets?

Search Kirschner’s Insurance Directory to help service your hard to place risks.

497 Risk Categories | 70,000 P&C Insurance Markets

kirschners
Specialty Markets Insight eNewsletter

Receive updates and analyses on hard to place and challenging coverages. Sign Up Now!

Advertisement. Closing in 15 seconds.