NU Online News Service, Sept. 19, 2:39 p.m.EDT

WASHINGTON—In his deficit-reduction proposal, PresidentObama voices support for provisions in House legislation that wouldeliminate subsidies, over five years, on 30 percent of propertiesinsured by the National Flood Insurance Program.

Legislation pending before the Senate would accelerate the endof subsidies by ending them over four years. The Senate BankingCommittee passed its bill Sept. 8 and it is now awaiting Senatefloor action.

Ben McKay, senior vice president of federal government relationsfor the Property Casualty Insurers Association of America (PCI),says, “We are pleased that President Obama included critical NFIPreforms in his deficit-reduction proposal to Congress.”

He says the president identified the NFIP as a key federalprogram that can contribute to deficit reduction, and reiteratedhis support for H.R. 1309, the House legislation that garneredoverwhelming bipartisan support in July.

“The president's plan calls for the NFIP to charge actuariallysound rates to address the program's staggering debt,” McKaysays.

Noting that the NFIP currently operates as a public-privatepartnership, McKay says, “Moving forward, we must also identifyopportunities to keep as many private-sector insurance jobs aspossible and prevent the expansion of the federal government's rolein administering flood insurance.”

Friday, industry officials said Senate officials have madecommitments that legislation will be passed by the Senate andreconciled with the House bill so as to ensure legislationreforming and extending the NFIP will be completed by Nov. 18.

The proposals to support cuts in subsidies to the NFIP wereincluded in a televised speech and in documents the presidentforwarded to Congress today.

The documents detail more than $3 trillion in net deficitreduction over the next 10 years.

Combined with the approximately $1 trillion in savings from thefirst 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 taxcuts and budget increases designed to create more jobs.

The House proposal supported by the president would increasepremiums over five years for a subset of subsidized properties:non-res­idential or non-primary residences, resi­dences sold to newowners, and severe repetitive-loss properties.

According to The President's Plan for Economic Growth andDeficit Reduction, currently 1.2 million or 20 percent of all NFIPproperties are charged premiums well below the actuarial value ofthe insured liability.

On average, (including subsidized and unsubsi­dized policies)NFIP premium collections cov­er approximately 70 percent of theactuarial value of the insured liability, the document says.

Other provisions of H.R. 1309 for which the president voicedsupport include redefining severe repetitive loss proper­ties asresidences with at least four paid claims greater than $5,000, ortwo paid claims that cumulatively exceed the market value of thehouse.

The president says he supports provisions of the bill that, oneyear after enactment, increase pre­miums for all policyholdersfitting the designated categories—non-residential or non-primaryresidences, residences sold to new owners, and severe repetitiveloss properties—by no more than 20 per­cent per year until theamount collected covers the full-expected cost of theinsur­ance.

Obama says in the document that the administration also supportsother measures in H.R.1309 that would increase the maximum policycoverage for structure and contents and authorize studies andpilots to test alternative approaches to flood insur­ance that aresustainable and cost-effective.

He estimates that under the proposed revisions included in H.R.1309, the NFIP would collect about $700 million in additionalpremium revenue over five years.

The Senate bill is similar.