Amazing! After almost four years as an orphan, the National Flood Insurance Program (NFIP) is picking up some powerful parents.

It is as if it has suddenly morphed from an ugly duckling into a beautiful swan.

The reason is that the latest fashion in Washington is to bring in additional revenues without the accompanying political pain of raising taxes.

The turn of events occurred last week when, in a major speech, President Obama himself voiced support for the House version of legislation that would reauthorize the National Flood Insurance Plan for five years—and reduce subsidies on 30 percent of the homes insured through the program over five years.

Jimi Grande, senior vice president of federal and political affairs for the National Association of Mutual Insurance Companies, sees the latest developments in a positive light.

“By charging adequate rates, this reform is projected to collect an additional $4.2 billion dollars over the next 10 years that will significantly aid the NFIP,” Grande said.

He adds, “We are pleased that President Obama recognizes and has highlighted the need to pass flood reform and to begin to charge risk-based rates for those who require flood coverage.”

Grande further notes that, “We cannot allow this issue to be part of the political football that is occurring in Washington. Elected officials in Washington are finding it difficult to agree on much these days, but the size of our debt is an issue that all of our leaders are focused on.”

The president made his comments as Congress prepared to vote on a continuing resolution (CR) that will keep the government running until Nov. 18. Extension of the NFIP is included in the CR. Without the CR, authorization for the program would run out at the end of the current fiscal year, which is Sept. 30.

Legislation pending before the Senate would accelerate the end of subsidies by ending them over four years. Such legislation was passed by the Senate Banking Committee Sept. 8 and is now awaiting Senate floor action.

Ben McKay, senior vice president of federal-government relations for the Property Casualty Insurers Association of America, says that, “We are pleased that the president identified the NFIP as a key federal program that can contribute to deficit reduction…The president’s plan calls for the NFIP to charge actuarially sound rates to address the program’s staggering debt.

“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,” McKay says.

Grande adds that officials have said that by Nov. 18 the bill will be passed by the Senate and reconciled with the similar House bill so as to ensure legislation reforming the NFIP and reauthorizing it until Sept. 30, 2016.


Cropping Crop Insurance

While the president’s 10-year deficit-reduction plan voiced support for reauthorization of the NFIP, it also sought to take another swipe at the crop-insurance subsidy program.

The president’s plan would reduce crop-insurance subsidies by an estimated $8.3 billion over 10 years, generating deep concern from underwriters and agents.

This would be in addition to $6 billion in cuts imposed by the reauthorization of the crop-subsidy program in 2008 and another $6 billion through revisions in the Standard Reinsurance Agreement in 2010.

Tom Zacharias, president of National Crop Insurance Services in Overland Park, Kan., says in reaction to the president’s proposal, “Congress needs to evaluate the economic impact of weakening the primary safety net on which farmers and our rural economy can rely.”

Charles Symington, senior vice president of government affairs for the Independent Insurance Agents and Brokers of America, says the president’s decision “will drastically change the program as we know it today and have a crippling effect on its intended beneficiaries—farmers and ranchers.”

Symington says the program “is still reeling” from the earlier cuts.

Zacharias adds, “The plan is devastating to those in agriculture, particularly in a year that has seen extremely volatile commodity prices and weather events, from droughts in Texas and Oklahoma to floods in the Northeast and Midwest.”