Debate over NFIP Reforms Likely to Extend into 2019

A new short-term extension through December 21 leaves the National Flood Insurance Program (NFIP) in limbo as Congress grapples with a lengthy to-do list in advance of the holidays.  NFIP, the biggest source of flood coverage in the U.S., has been reauthorized through a set of short-term extensions in the last year as lawmakers debate the prospect of reforms to the program. NFIP has struggled to remain solvent in the wake of costly hurricanes, but lawmakers have not yet reached a consensus on how to make the program more sustainable.

In the face of the most recent extension, FEMA published a statement calling the short-term reauthorization “an opportunity for Congress to take bold steps to reduce the complexity of the program and strengthen the NFIP’s financial framework so that the program can continue helping individuals and communities take the critical step of securing flood insurance.” We have previously written about FEMA’s own changes to the program, including steps to loosen restrictions on private insurers selling NFIP policies, as well as purchasing reinsurance for the program. Congress will have to determine the viability of other changes, such as proposals to make rates correspond more accurately to risk and funding for mitigation of flood-prone areas.

The short-term extension through December 21 puts NFIP reauthorization on the same timetable as other significant legislative deadlines, including the expiration of a continuing resolution to fund the government. Should Congress pass another extension for NFIP without making changes to the program, the 116^th Congress will take up the debate with several changes to the key players in the negotiations. Most notably, current House of Representatives Financial Services Committee chair Jeb Hensarling will be succeeded by incoming chair Maxine Waters.  Waters co-authored a reform act in 2012 that would have significantly curbed government subsidies to premiums, but in recent years has advocated a more cautious approach to rate increases.