The Hurricane Irene flood damage has come at a bad time for the National Flood Insurance Program (NFIP) as Congress is currently debating the way in which the debt-strapped program will be overhauled when it expires on September 30.
This looming expiry has real estate and insurance industry lobbyists saying that it is not likely that any long term agreement will be completed by lawmakers in time. For this reason, it is probable that the program will be extended over the short-term.
One of the main issues being faced is that flood damage, unlike damage caused by wind, is not covered by the standard homeowner’s insurance policy. As a result, in order to obtain protection, businesses and homeowners purchase it from the NFIP.
Since 2008, Congress has been leaning on temporary fixes to the program as it has been unable to agree on the changes that need to be made to revamp the program, which built almost $18 billion in debt following 2005’s Hurricane Katrina.
The House already cleared a bill in July 2011 that included several changes such as allowing the NFIP premiums to increase by up to 20 percent every year.
The rates for the program are already widely believed to be insufficient considering the risk that is faced by taxpayers. However, lobbyists say that the lawmakers remain divided over how much the rates should rise, and within what period of time the increases should occur.
Another bill that was introduced within the Senate would permit an annual rate increase of 15 percent. Furthermore, unlike the House, the Senate is calling for the forgiveness of the program’s debts.