The National Flood Insurance Program
Even before this year’s costly hurricanes in Houston and Florida, the NFPI was $25 billion in debt, having paid out in claims that much more than it had received in premiums for insurance. In October, Congress and taxpayers spent $16 billion to bail out the NFIP temporarily.
More than $1 trillion of property at risk is insured through the National Flood Insurance Program. Much more is not part of the program. On the East and Gulf coasts alone, there is an estimated $64 trillion in properties at risk. Nearly all are not insuring against flood, but counting on government aid when disaster strikes.
The House this month passed the 21st Century Flood Reform Act, a long-term reauthorization. The revised Senate version and the reconciliation could take months.
The flood insurance provisions will keep the program operating through December 22nd, allowing legislators time to work on a longer term reauthorization for the important federal program.
Increases in flood insurance premiums are inevitable, as the current program is not sustainable. The impact on real estate in South Florida will be significant, and not just for luxury or commercial properties on the coast. Much of South Florida is within a flood plain as designated by the FEMA map. Lenders require flood insurance on properties located in a flood plain, many of which are miles inland. Flood insurance is also required by lenders on properties within 500 feet of a designated flood plain. As a property not in a flood plain may still have flooding, property owners may add a flood policy to their insurance. This has been relatively inexpensive in the past, compared to the premium for windstorm coverage. Increases in the cost of flood insurance will make an already expensive real estate market with high property taxes and windstorm insurance premiums less affordable.