Senate considers flood insurance reform as program faces another deadline

A man carrying a child is rescued after rising floodwaters from Hurricane Harvey in Spring, Texas, in 2017. The government’s flood insurance program is expected to expire on March 8, and some lawmakers have expressed concerns about the program and the government’s efforts to improve flood insurance. It makes flood insurance unaffordable for many families.

Bloomberg News

WASHINGTON — The Senate Banking Committee is renewing its push to extend a flood insurance program that is critical to mortgage bankers’ ability to close housing deals before the program expires on March 8.

Continue funding for the National Flood Insurance Program Possibly a victim of last fall’s near-government shutdownthis move will jeopardize thousands of home sales every week.

While the program enjoys bipartisan support, efforts to reform it and make it more sustainable in the face of growing numbers of natural disasters and costly flooding have so far been limited. Hit a dead end in CongressInstead, the program has experienced 28 short-term extensions since 2017.

Flood insurance is mandatory for any property in a high-risk area that has a mortgage from a federally backed or federally regulated lender. If a flood insurance program lapses, the program won’t be able to sell new flood insurance policies and won’t be able to renew old ones — although existing policies will remain in effect until they expire.

Concerns about affordability emerged at a Senate Banking Committee hearing Thursday. Senator Bob Menendez, DN.J.Louisiana Republican Bill Cassidy and Louisiana Republican John Kennedy have introduced a bill to make the program more affordable for homeowners, including capping rate increases The limit is 9%.

But lawmakers say changes made by the Biden administration actually make flood insurance more expensive. The new pricing model put in place by the Biden administration — known as Risk Rating 2.0 — is meant to lower premiums by more accurately calculating risk, but lawmakers say that’s not how it works.

“They say one million out of five million people [with flood insurance policies] “I haven’t told anyone that their rates are going to go down,” Kennedy said. “It’s just an excuse to raise premiums and they don’t care. The whole purpose of the National Flood Insurance Program is to provide a product that’s affordable for people in my state.” ”

Menendez had similar complaints.

“Since FEMA recently changed its rating methodology, the program has lost 150,000 policyholders. FEMA itself estimates that the program will lose 1 million policyholders by the end of the decade due to rising premiums,” he said. “In Paterson, New Jersey, if the median household income is $50,000 per year, a policyholder’s premiums will increase from an average of $1,500 per year to an average of $4,000 per year. In Keansburg, New Jersey, the median household income is $76,000 dollars, 1,000 policyholders will average from $1,300 to $3,500. The list goes on.”

Cassidy, who is not a member of the Senate Banking Committee but joined Menendez and Kennedy in pushing the bill at the start of the hearing, said Risk Rating 2.0 has “made flood insurance simply unaffordable — and in some cases The price of insurance policies is rising.” 1,000%.

Cassidy continued, “Currently, we know that we are in an actuarial death spiral, where people will give up coverage that they can no longer afford.” Policyholders giving up coverage will leave “a minority who can insure” the risk, so premiums More expensive, so more people give up. ”

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