Flood Insurance Reform Needs Further Reform

    New York Senators Charles E. Schumer and Kirsten Gillibrand and Representative Tim Bishop are among a bipartisan group of Washington lawmakers pushing for a second round of reform of the recently reformed National Flood Insurance Program. Their call for action comes as an increasing number of property owners here and around the country have become aware of steep increases in their premiums, the result of the Biggert-Waters Flood Insurance Reform Act of 2012, which sought to answer the program’s longstanding deficit. Debate in the Senate on a new Homeowner Flood Insurance Affordability Act is expected this week. From the perspective of many on the East End of Long Island, change is necessary.

    The intention of the authors of the earlier reform of federal flood insurance was good: Since Hurricane Katrina, the program had accumulated a deficit as large as $25 billion. Biggert-Waters was supposed to address that by phasing in premium hikes to reflect actual risks and reduce the subsidy from American taxpayers at large, which kept premiums low. In the new math, the safer a property from flood damage, the lower the cost. The reverse was applied to the most at-risk properties, as set out on federal maps.

    As things unfolded, however, the increases soared beyond belief — as much as 1,000 percent in some cases; in isolated examples rates were said to be leaping from $4,000 a year to more than $40,000. As a result, real estate deals have been jeopardized or called off. Outrage is mounting.

    There is a hidden risk to the federal program if prices rise to the point that some property owners decide to drop coverage. In that scenario, Congress might well be inclined to spend billions following the next major flood or hurricane to pay for uninsured losses. It is interesting to note that the $50 billion Hurricane Sandy relief package is just about double the accumulated deficit of the entire program over its nearly four decades of existence.

    Reducing taxpayer subsidies for flood insurance is necessary and reasonable. Doing so without destroying real estate markets or pricing some people out of their homes is reasonable too. The measures outlined in the proposed affordability act attempt to strike that balance and deserve swift passage.