Importance of reauthorizing U.S. flood insurance program

Last year several major storms hit our coasts and we saw ruined homes and businesses, displaced families, and ravaged communities. These storms produced an estimated $52 billion in damage, second only to the 2005 season which produced Hurricane Katrina and overall resulted in $141.3 billion worth of insured losses.

It is essential for Congress to renew the National Flood Insurance Program (NFIP) now. This much-needed federal program, which insures more than 5.5 million Americans against flood damage, will expire if Congress does not reauthorize it by Wednesday.

Many Americans do not know that flood insurance is not included in the standard homeowners’ insurance policy. The high cost of insuring against floods would be unaffordable for most citizens in flood-prone areas, and that is why the federal government created the NFIP in 1968 — to ensure that flood coverage would be available and affordable to homeowners in a way that the private market could not.

The NFIP protects taxpayers by ensuring that policyholders share in financing the program through their insurance premiums. This funding helps to offset flood losses that otherwise would be borne entirely by taxpayers.

The program, additionally, does more than provide insurance coverage. According to the Federal Emergency Management Agency (FEMA), more than 20,400 communities participate in the program, and have adopted floodplain management ordinances in efforts to reduce future flood damage. The availability of federally backed insurance is a strong incentive to enforce sound land-use policies and floodplain management.

With the program set to expire, time is short and the consequences of failing to act could be more costly than one realizes. The protection the program provides for taxpayers — nearly $3 billion a year in premiums — would be displaced. Beyond that, post-flood recovery efforts would be greatly hampered as communities struggled to rebuild without the support of the NFIP.

There could also be dire consequences not just for homeowners, but for the nation’s economy at large. Real estate transactions involving properties with federally backed mortgages cannot go through the closing process without flood insurance. Any mortgage that requires flood insurance would unable to close if the flood program expires. With the housing market still struggling, we do not need additional disruptions to the market or additional hardships for consumers.

The NFIP offers essential protection to policyholders nationwide, and it is highly important to Americans and the U.S. economy. Congress should reauthorize this program now to avoid the costly fallout of its expiration.