NU Online News Service, April 1, 3:40 a.m. EDT
The administrator of the Federal Emergency Management Agency told a congressional panel today that the need for subsidies makes it unlikely that the National Flood Insurance Program will ever be able to pay off its debt.
Craig Fugate, administrator of FEMA, focused on the cost issue even though members of the panel, the Subcommittee on Insurance, Housing and Community Opportunity of the House Financial Services Committee, are particularly sensitive to the cost issue.
In fact, draft legislation planned for markup next Wednesday contains language designed to ease the cost burden on policyholders and reauthorize the program for five years.
Fugate says the cost of subsidies in the current program—given mainly to ease costs for people brought into the program under recently updated flood maps—is reducing annual premium income by one-third.
According to a staff memo provided to members of the committee in advance of the hearing, the cost of flood insurance will be a key issue in the upcoming draft legislation.
The memo says that to deal with the cost issue, the draft bill would revise the current program so that policyholders will be better able to manage the costs of purchasing flood insurance.
The panel held the special hearing today because Fugate was unable to testify at a hearing on the issue held last month.
He testified that, while the current program collects more than $3 billion in premium revenue annually, estimates indicate that an additional $1.5 billion in premium revenue is foregone due to the current subsidized rate policy.
"This annual premium shortfall has at times required FEMA to use its statutory authority to borrow funds from the Treasury," Fugate says.
He warns the panel that because of remapping and other issues, the cost of flood-insurance policies has become a political issue and should be part of the policy discussion about the program.
"These premiums represent an unbudgeted and often unanticipated expense to property owners. To some, the insurance is unaffordable."
Fugate notes that affordability concerns are being explored as FEMA continues to examine ways the NFIP should be revised. Among the issues being examined, he says, are credits and vouchers as well as high-deductible policies.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.