The program was generally self-sustaining until Hurricane Katrina and other hurricanes struck in 2005. The program now owes the Treasury nearly $18 billion dollars., June 29, 2012

WASHINGTON –  Congress on Friday approved a 5-year extension to the National Flood Insurance Program, which covers 5.6 million people.

Failure to renew the program would have been a blow to the fragile housing market because potential homeowners in flood-susceptible areas would be unable to close on mortgages or refinance loans. A two-month lapse in the program in 2010 resulted in some 1,400 home sales a day being cancelled.

Congress created the flood insurance program in 1968 because few private insurers cover flood damage, leaving the government to cover the costs of disasters. Many of those covered by the program live in flood-prone areas where flood insurance is mandatory for those with mortgages from federally regulated lenders.

The program was generally self-sustaining until Hurricane Katrina and other hurricanes struck in 2005. The program now owes the Treasury nearly $18 billion dollars.

The plan approved Friday attempts to put the program on better financial footing by giving the government greater flexibility to raise rates. It also ends federal coverage for some properties, including vacation homes.

The flood insurance measure was included in a package of bills that also set federal transportation policy and prevent a doubling of interest rates for millions of college students.

It includes a provision by Sen. Roger Wicker, R-Miss., that enlists the National Oceanic and Atmospheric Administration to assess the nature of hurricane damage. After Katrina, private insurers tried to avoid paying claims for wind damage, saying that homes were destroyed by federally covered water damage.

It also moves to improve the floodplain mapping of the Federal Emergency Management Agency, which runs the flood insurance program, and streamlines FEMA efforts to raise or move homes that are sources of repetitive claims to the insurance fund.

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Flood Insurance Premiums Could Double in Four Years

Fort Lauderdale Sun Sentinel, By Julie Patel July 2, 2012 09:55 AM

President Barack Obama is expected to sign a bill this week that would, among other things, extend the National Flood Insurance Program five years.

The program was set to expire July 31 – during hurricane season – and a lapse would have prevented potential homeowners in flood-prone areas from closing on their mortgages. Since 2008, Congress only approved short-term extensions in part because of disagreements about rate hikes to offset the program's $18 billion debt.

That changed Friday when both the House and Senate passed a transportation bill that includes a measure extending the flood insurance program until Sept. 31, 2013 and making it more financially sound.

The legislation would raise the cap on premium hikes to 20 percent a year, from 10 percent a year. That means a premium of $1,000 a year could more than double in four years as the increases compound. The bill would also allow increases of 25 percent a year for certain properties such as vacation homes or homes with repeated claims and it would set minimum deductibles of $1,000 to $2,000, depending on the age of the home and the amount of coverage.

More than a third of the flood insurance program’s 5.6 million policies are in Florida, including more than 900,000 policies in Broward, Palm Beach and Miami-Dade counties.

The Federal Emergency Management Agency released new proposed flood risk maps for Broward County. If they're approved, they'll allow many residents to drop flood insurance.

Wall Street Journal, July 1, 2012

Congress Extends Flood Insurance Program As Hurricane Hits Gulf

Homeowners, real-estate agents and insurance brokers with properties located in flood zones are breathing a sigh of relief now that Congress has temporarily extended the National Flood Insurance Program, just as Hurricane Alex struck the Gulf coast of Texas, making landfall as a tropical storm with heavy rains.

On Wednesday, the Senate passed a measure to reauthorize the flood insurance program through Sept. 30. President Obama is expected to sign the legislation, which the House of Representatives approved last week.

This marks the fourth temporary extension of the program since last December. A previous extension expired on June 1, just as the Atlantic hurricane season began.

During the hiatus, no new flood insurance policies could be issued or renewed, though previously issued policies remained in force and claims were paid. The bill allows new and renewed policies to be retroactive, but there is still a 30-day waiting period after issuance until new policies take effect.

Concerns are especially acute this year in communities near the Gulf of Mexico, because if homes are damaged by storm-surge waters contaminated by the oil spill, only flood insurance would cover the cost of repairs.

Most mortgage lenders require homes situated in high-risk areas to maintain flood insurance. Just over 35% of homes in Louisiana and Florida are required to own the policies, the highest proportion in the country, according to the National Association of Realtors. South Carolina, Florida and Texas are other states where double-digit percentages of homes are required by lenders to own flood insurance, said Walter Molony, a spokesman for the Realtors. Thousands of sales were delayed each day that the flood insurance program was in hiatus, he said.

The NFIP has about 5.6 million policies in force, and insures about $1.2 trillion in property, according to the Federal Emergency Management Agency, which runs the program. FEMA also manages flood plains and produces flood hazard maps. The vast majority of private homeowners’ insurance policies don’t cover flooding. (For more information, go to

“It is a temporary reprieve for consumers and lenders but if precedent is prelude to the future we can expect other disruptions. And these disruptions are significant,” said Bob Rusbuldt, president and chief executive officer of the Independent Insurance Agents & Brokers of America, a trade group. He said insurance groups are hoping Congress will pass a long-term bill soon.

In Texas, where Hurricane Alex is expected to produce heavy rains and flooding, there are 688,000 flood insurance policies, some of which are up for renewal. The storm surge from Hurricane Ike in 2008 produced 44,000 flood insurance claims in the state, according to the Insurance Council of Texas.

The flood bills’ extension comes as the fifth anniversary of Hurricane Katrina approaches next month.  A number of bills proposing an overhaul of the flood program were proposed in the wake of the nation’s costliest hurricane, but Congress hasn’t acted to significantly overhaul the 42-year-old flood-insurance program. Among the proposals is raising the $250,000 flood loss limit for residential properties and $500,000 for commercial ones.

But critics of the program say a bigger fix is necessary.

“The program is in considerable debt and there is no way to get out of it. Instead of dealing with the debt and the structural deficit the program has, Congress keeps kicking the can down the road,” says Scott Holladay, an economics fellow the Institute for Policy Integrity at NYU Law School. He says the program is running a $19 billion deficit since 2005’s record hurricane season.