House approves extension of national flood insurance program until 2016

The House on Tuesday evening easily approved the Flood Insurance Reform Act, a bill that enjoyed rare bipartisan support even though it could result in higher flood insurance premiums at a time of significant flooding in the middle of the country.

The bill, H.R. 1309, was approved in a 406-22 vote; most of the “no” votes were Republican members.

Several members of both parties agreed that a top priority of the bill is eliminating the red ink that the National Flood Insurance Program (NFIP) has generated over the past several decades. Members noted that the NFIP is nearly $18 billion in debt, and spoke in favor of the bill that would require the phasing in of actuarially sound rates for flood insurance policies, and phasing out taxpayer subsidized rates.

This change is expected to raise $4.2 billion over 10 years, giving the NFIP a start at paying down its debt. Republicans in particular noted that just 1 percent of the claims brought under the NFIP come from 40 percent of the policyholders, a sign that the NFIP was not pricing risk appropriately.

This fix, more than any other, seemed to bring the parties together on a bill that would extend the NFIP until September 30, 2016. Without an extension, the NFIP expires at the end of this September.

Rep. Candice Miller (R-Mich.) argued during the debate that the federal government should exit the flood insurance business completely. “I think this program needs to be eliminated, not reformed,” she said. “And I would start with this basic premise. Why is the government in the flood insurance business?”

But the House easily rejected her amendment to terminate the program in a 38-384 vote.

The House did accept another key amendment from House Financial Services Committee Chairman Spencer Bachus (R-Ala.) and Reps. Brad Sherman (D-Calif.) and Greg Meeks (D-N.Y.). Their amendment requires that the government reduce the number of flood insurance policies it manages.

This amendment was a reaction to the decision by State Farm Insurance to dump hundreds of thousands of policies onto the government. This prompted private industry to fear that these policies would remain with the government, and in effect create a huge competitor to the private market.