The federal government is providing flood insurance at about half the cost of the true market risk, according to a new study by the Property Casualty Insurers Association of America (PCI).
The association said it was releasing the findings on the National Flood Insurance Program (NFIP) rates as a benchmarking tool for lawmakers as they discuss the Flood Insurance Reform Act of 2011.
The U.S. House Financial Services Committee unanimously approved the bill May 13, which would phase in more accurate, risk-based pricing, as well as address issues about mapping and introduce coverage improvements for consumers. It also proposes extending the program, set to expire Sept. 30, by five years. The program, now $17.75 billion in debt, has operated under short-term extensions for the last few years.
"We are pleased that the new bill in the House includes provisions to move the NFIP toward more adequate rates that will stabilize the program and reduce taxpayers' exposure to costly relief efforts," Robert Gordon, PCI's senior vice president of policy development and research, said in a press statement.
The PCI study found that in some parts of the country current flood insurance rates are only a third of the true market-risk cost.
"Moving forward, we need to provide the flood program with the ability to sustain itself financially and adequately protect its policyholders with sufficient capital," Gordon said.