Senate Fails to Pass Important Flood Insurance Reforms

Last week, a bill (H.R. 3823) to reauthorize the National Flood Insurance Program (NFIP) was signed into law. The bill unfortunately did not include a provision to expand private flood insurance under the NFIP. Although related provision were included in H.R. 3823 when it passed the House on Thursday morning, the Senate then took up the measure, amended it to remove the flood provisions, and passed it by voice vote later that afternoon. The bill was then signed by President Trump and became law on Friday without the initial House-passed private flood insurance provision.

It’s worth noting that the House passed a similar provision last Congress in the form of a standalone bill – the Flood Insurance Market Parity and Modernization Act (H.R. 2901), introduced by Representative Dennis Ross (R-Fla.). Considering the bill passed 419-0, the Senate had little reason to strip out the House provision this time around.

H.R. 2901 would have changed flood insurance regulations so that property insured in the private market is still considered insured by the government. This bill will help increase competition within the private insurance market and give homeowners and businesses more choice when deciding how to insure their property. It should also reduce the reliance on taxpayer dollars used to subsidize the NFIP, which has paid out more than $51 billion in claims from 1978-2014.

Heritage Action’s position remains that while additional borrowing authority may be necessary in order to cover claims to policyholders in the areas impacted by Hurricanes Harvey and Irma, this should be accompanied by reforms that would initiate the phase-out of the national flood insurance monopoly in favor of a private insurance market.

As The Heritage Foundation has explained, creating private competition in flood insurance is important part of reforming the NFIP. When the NFIP was created, private companies insured some homes and businesses against floods. However, many structures could not get private coverage. As the government program expanded, most private insurers have left the field. This is not likely to change in the near term, but increasing the proportion of structures that pay actuarially based premiums may lure some private companies back into competing with the NFIP.

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