When You Think Progress is Being Made, Reality Bites

Photo courtesy of: Architect of the Capitol 

By Mark E. Ruquet

Just when we thought there was progress on the flood insurance rate rollback, the opposition gets some additional ammunition to do nothing to help average Americans.

Progress is coming in the form of a scheduled vote on the roll back bill (S 1846) in the Senate scheduled for today.  The good news is the bill has 30 sponsors. The bad news is that it will take 60 votes to keep the bill progressing through the Senate should any of the legislators object and threaten to filibuster, pretty much stopping the bill cold in its tracks. Keep your fingers crossed.

Across the Capitol building, we know Speaker of the House John Boehner, R-Ohio, has indicated he won’t bring the Senate’s bill up on the House floor. That means if we want to get anything done, we’ve got one nasty fight ahead of us to raise the attention of Congress and make them realize that their negligence will result in the loss of votes come re-election. There are currently 180 Congressmen and women co-sponsoring the House version of the Homeowner Flood Insurance Affordability Act (H.R. 3370) with a substantial contingent of New York and New Jersey representatives co-sponsoring the bill.

Here again, it is a math issue. We need a majority. There are 435 seats, and the Republican’s hold the bulk of those seats. On the positive side, this is not a partisan issue, but there are Democrats aligned with conservative Republicans who feel flood insurance policyholders should be paying the National Flood Insurance Program’s deficit of $24 billion. It’s not the fault of the policyholders that Congress created a flawed program in the mid-1960s. Yet, we’re getting stuck with the bill. It will take 218 Congressmen, if not more, to convince Boehner that it is in the House’s interest to come up with some credible plan that does not bankrupt more than 5 million American homeowners trapped in this onerous cycle of escalating premiums.

Unfortunately, critics of the flood insurance roll back got some ammunition last week from the well respected Government Accountability Office, which focused on the question of what it will take for more private sector insurers to write flood insurance policies. The report’s bottom line is that insurers will start writing flood policies once premiums have risen high enough that they can make a profit.

Tellingly, the GAO did paint a realistic picture of what the program faces if the private insurance industry is to write flood. While insurers would charge what they feel is the cost of the risk, they need enough policyholders to “to properly manage and diversify their risk, but stakeholders (insurers) said that many property owners do not buy flood insurance because they may have an inaccurate perception of their risk of flooding.” The GAO also points out that the “rates might seem unaffordable to many homeowners.”

Should the flood insurance reform bill falter in the House, or become stalled in the Senate, maybe the GAO report can serve as a basis for compromise to provide relief for us. Among GAO’s suggestion is to allow the subsidies to lapse, but provide “direct means-based subsidiary to some policyholders”—a suggestion that only works for the majority of middleclass Americans if the threshold for assistance is high enough.

The other suggestions involve realigning the program either as a residual insurer (an insurer of last resort) or as a reinsurer. Without getting into the nuts-and-bolts of either—neither would help us in the short-term.

The GAO made no new recommendations. However, if anyone was curious about where Congress got the original idea supporting the increases we are suffering today, look no further than the GAO’s report in June 2011 (GAO-11-297) that said, “that Congress consider eliminating subsidized rates, charge full-risk rates to all policyholders, and appropriate funds for premium assistance to eligible policyholders to address affordability issues.”

We have a long way to go folks.