In the deficit plan revealed on Monday, President Barack Obama endorsed key elements of a U.S. flood insurance reform bill passed by the House, even as the reform has stalled in the Senate without a clear path forward.
At stake is the future of the National Flood Insurance Program (NFIP), which writes almost all of the flood insurance for homeowners in the United States. The program has an unsustainable debt load and has operated in recent years on a series of annual extensions.
In July the House of Representatives, in a rare display of bipartisanship, passed a reform bill on a 406-22 vote. Rather than the House measure, though, the Senate has been considering its own bill with key differences. That bill has moved through the Senate Banking Committee but has yet to come up for a vote.
With the program due to expire Sept. 30, Congress is expected to extend the program for seven weeks as part of a broader resolution this week to finance government operations.
The Obama plan endorses a central element of the House bill -- raising premiums on subsidized policies over a period of years, so that policyholders are paying rates closer to the actual risk the program has taken on. Private insurers have said they could never write flood policies because the NFIP's rates undercut what the market would charge.
With that in mind, Obama also endorsed elements of the House bill that would attempt to encourage a private market for flood insurance, as is the case in most of the rest of the developed world.
The Obama administration estimated the reforms would generate an additional $4.2 billion in premium revenue over 10 years, which is still less than a quarter of what the program owes following its post-Hurricane Katrina bailout.