The U.S. Senate Banking, Housing, and Urban Affairs Committee recently approved legislation to reform the National Flood Insurance Program, which is set to expire on Sept. 30.

The Flood Insurance Reform and Modernization Act would extend the program through 2016, forgive its $18 billion debt, and enable the Federal Emergency Management Agency to increase rates by up to 15 percent per year. Additionally, the NFIP would have to build up and maintain a reserve fund, enforce the mandatory purchase requirement, and allow for the transition of properties to newly mapped flood zones. The measure now moves to the full Senate.

The U.S. House version of the bill would enable rate increases of 20 percent per year but does not forgive the NFIP's debt. Moreover, the House bill would cover business interruption and additional living expenses as optional provisions. If the Senate passes the measure, it will have to confer with the House quickly to reauthorize the program before its expiration.

American Insurance Association Vice President for Federal Affairs Tom Santos said, "AIA and its member companies commend the Senate Banking Committee for passing a NFIP reform and reauthorization bill out of committee that contains a long-term extension and makes necessary reforms to the program that will put it on a path toward a more sound financial footing and provide the ability to charge risk-based premiums." AIA expects the Senate measure to put the NFIP on better financial footing by enabling it to charge risk-based premiums. "Given the inclement weather and severe flooding throughout the country, it is especially critical that this program be reauthorized and extended so that no home or business is without the ability to receive coverage. With more than 5.6 million policy holders dependent upon the NFIP for their protection against floods, we hope the full Senate will now move to enact these important reforms," Santos said.

Source: "Senate Committee Passes Federal Flood Insurance Reform Legislation," Insurance Journal (09/08/11)

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