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Without Congressional Action, Flood Insurance Program Will Expire

June is an ominous month for Houston homeowners.  June 1 traditionally marks the start of the Atlantic hurricane season.  June 2011 marks the 10th anniversary of Tropical Storm Allison, the costliest tropical storm in U.S. history.  Tropical Storm Allison flooded an estimated 73,000 houses throughout Harris County.  Damages exceeded $5 billion nationwide.

It is important to remember that floods are a national problem and not just a coastal issue.  Flood disasters have been declared in every state — along rivers, anywhere where snow melts or rain falls.  This is why we have a National Flood Insurance Program (NFIP).  Historic claims data shows the top three states contributing the most net revenue to NFIP coffers were on the Gulf; however, the top three with the most NFIP net loss years were actually in the Midwest.

Now, this key consumer protection for all Americans prone to flooding is at risk.  Without reauthorization, the NFIP will expire on September 30th, 2011.  The National Association of REALTORS (NAR) is urging Congress to reauthorize NFIP long-term to ensure access to affordable flood insurance.

Legislative History

On May 13, 2011, the House Financial Services Committee unanimously approved H.R. 1309, the Flood Insurance Reform Act (Biggert, R-IL; Waters, D-CA). The bill would:

  • Extend for five years, NFIP’s authority to issue flood insurance which is not available in the private insurance market, except for the wealthiest property owners.
  • Reform the NFIP to strengthen participation and put the program back on the path to fiscal solvency

NAR is recommending Congress to reauthorize NFIP for at least five years and end the uncertainty of extensions and shutdowns.  Above all, Congress should not let this vital program lapse again.  Millions of American taxpayers rely on the NFIP for flood protection.

Why is the NFIP So Vital?

Floods claimed more lives and property than any other natural disaster in the U.S. over the last century.  Unable to ignore the rising cost to taxpayers of disaster payments for uninsured properties or the lack of a private market for flood insurance, Congress created the NFIP in 1968. Today, 5.6 million property owners rely on the program in 21,000 communities where flood insurance is required for federally related mortgages.

Since September 2008, Congress has approved nine NFIP extensions and allowed five lapses. During the June 2010 lapse, 47,000 home sales were delayed or cancelled according to NAR survey data.  Real estate markets require certainty to make the long-term investments that are vital to the U.S. economic recovery.

The four large insurers that write virtually all the private flood insurance today do so only for “high net worth” owners and high-value property at an average price twice the NFIP’s.  Reinsurance would not address the fundamental market failure, which would force private insurers to set rates that no one but the wealthiest could afford while attempting to cover NFIP’s 5.6 million policies.

Reauthorizing the NFIP saves taxpayers both money and property.  It is important to urge your Member of Congress to support reauthorization of the NFIP and support passage of H.R. 1309.

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