NU Online News Service, June 10, 2:54 p.m.EDT

WASHINGTON—Federal flood-management officials areconsidering whether to base National Flood Insurance Program (NFIP)premiums on community-mitigation efforts—a departure from currentpractice.

Craig Fugate, administrator of the Federal Emergency ManagementAgency, which manages the NFIP, disclosed in testimony Thursdaybefore the Senate Banking Committee that the agency is consideringincentivizing mitigation efforts as a means of cutting the cost ofthe NFIP.

Fugate testified that the community-based risk-assessment systemis being considered because it was suggested by programstakeholders during the current effort by the agency to determinehow the program should be structured in the future.

Under the proposal, risk assessments would be performed onindividual buildings and the insurance premium payment would bemade by the community.

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As part of this option, the federal government would continue toback flood-insurance contracts in exchange for the adoption andenforcement of minimum floodplain-management standards and wouldprovide an assessment and calculation of flood risk, Fugatesaid.

"The sum in dollars of the risk assessment for all buildings inthe community would constitute the required premium," he said."Incentives could be structured to encourage communities toimplement flood-mitigation measures in order to reduce theiroverall premium assessment."

An industry lobbyist sums up the hearing by saying senatorsindicated "strong support for a long-term reauthorization," but seethe NFIP as in need of "significant reform," especially in gettingthe program in better fiscal condition. 

"Included in those reforms is a move toward more accuraterisk-based pricing," the lobbyist says.

Nearly every senator attending the hearing asked questions aboutmapping and levee issues in their states.

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Senators also voiced concern about the potential impact thatlevee decertification and changes to the flood maps are having orwill have on homeowners who may be required to purchase floodinsurance.

And some senators voiced a need to encourage further involvementof the private-insurance market.

But the insurance lobbyist agrees that the members showedthrough their questions that while the NFIP is of vital interest topeople in many states, higher priority issues make it unlikely thatthe Senate will be able to complete work on legislation providing along-term reauthorization of the program before the currentextension of the existing program expires Sept. 30.

Industry trade groups are urging prompt action in both the Houseand Senate on the legislation.

Ben McKay, senior vice president of federal government relationsfor the Property Casualty Insurers Association of America, says:"The flood program is currently saddled with approximately $18billion of debt. We are pleased that the House flood-insurancereform bill includes provisions to move the NFIP toward moreadequate rates that will stabilize the program and reducetaxpayers' exposure to costly relief efforts."

Jimi Grande, senior vice president of federal and politicalaffairs for the National Association of Mutual Insurance Companies(NAMIC), adds, "The need for the NFIP has rarely been more clearthan it is now, and the responsibility for ensuring the NFIP willbe there for homeowners across the country rests withCongress."

Matt Gannon, NAMIC assistant vice president for federal affairs,says the problems "facing NFIP aren't new. They've been the samesince 2005. Since then, the NFIP has been a burden on thetaxpayers, and it will continue to be one unless Congressacts."