The proposed changes are expected to reduce the cost of coverage to low-income homeowners.
Low-income homeowners stand to pay less for coverage under the National Flood Insurance Program (NFIP) if the Federal Emergency Management Administration’s (FEMA) proposed 17 changes are implemented.
NFIP has been struggling with its finances amid more frequent and severe storms due to climate change.
FEMA is seeking to create a more thinly spread risk by drawing more property owners to purchase flood insurance policies. The agency’s goal is to implement a number of changes in federal law that would make NFIP a more efficient and effective program.
“It seems clear to me that the program is in desperate need of reform,” said US Representative Warren Davidson (R-Ohio), the chair of the House Financial Services Subcommittee on Housing and Insurance. “This work is crucial and will ensure this program is moving in the right direction for taxpayers and policyholders alike, particularly given FEMA’s recent internal work to incorporate industry best practices and technology into its management of the NFIP.”
One of the flood insurance program proposals is designed to cancel its $20.5 billion debt.
Among the 17 proposed changes, one of them requests that Congress cancel the $20.5 billion debt NFIP owes the federal government, even after its $16 billion debt was forgiven a handful of years ago. NFIP’s debt payments consume about a third of its revenues, and the debt builds interest at a rate of about $1 million per day.
FEMA also proposed that Congress alter federal law so that the agency would be able to begin refusing coverage to properties that regularly experience flooding. NFIP has already paid around 350,000 for at least two restorations due to damage from flooding. Among those, 10,000 have been flooded and restored at least 10 times.
The proposed changes are not final, and several of the details of the changes – such as the income thresholds to qualify for lower flood insurance rates – have not yet been fully established. To implement any or all the changes, Congress is required to file legislation in coming months so they could be completed in time for the reauthorization deadline for the program on September 30.