Flood Insurance Reform and Modernization Act of 2007 | In NewRetirement's Questions & Answers Forum

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QUESTION:
Flood Insurance Reform and Modernization Act of 2007
The Flood Insurance and Modernization Act of 2007 would modify the National Flood Insurance Program (NFIP) to increase the amount of Premiums collected and reduce the cost of expected claims. The program's outstanding debt to the Treasury of $17.5 billion also would be forgiven. CBO expects that enacting this legislation would improve the financial status of NFIP and significantly increase the likelihood that the program could continue to offer insurance coverage and pay claims in a timely fashion. CBO expects that without a change in law, the NFIP would be unable to pay all flood insurance claims promptly, and faced with a nonfunctioning program, policy holders may abandon it. In such cases, the Federal Government would be called upon to provide additional relief in the aftermath of a disaster for properties that would otherwise be insured. The CBO cannot predict when this might occur, but today the program faces a future of inadequate resources to pay its obligations. The bill would direc the Federal Emergency Management Agency (FEMA) to increase premium rates by 25 percent per year on certain policies that pay less than the expected cost under current law. FEMA would be authorized to impose average annual rate increases of up to 15 percent on all other categories of policy holders. CBO estimates that premium increases at this maximum level would be necessary to establish the reserve fund that would be created under the bill to pay insurance claims whenever necessary. Finally, the bill would require policy holders to carry a larger deductible and would end the current practice of offering new policies to some property owners at less than their expected cost. These changes would increase the cost to policy holders and reduce the net cost of the program to the Federal Government. CBO estimates that the proposed changes to the NFIP abn the elimination of its Treasury debt would increase premium revenue over the next ten years by nearly $10 billion and would reduce NFIP outlays by about $10.6 billion over the current program. CBO expects that this legislation would allow the program to avoid developing a growing backlog of unpaid claims, which we estimate could reach a value of $21 by 2017. As the value of flood insurance coverage in force continues to grow, the expected cost of claims that the NFIP will face in the next decade will also increase. This CBO estimate assumes that substantial numbers of policy holders would drop flood insurance coverage or find alternatives to the NFIP as their insurance premiums rise steadily over the period. [see http://www.cbo.gov/ftpdocs/87xx/doc8777/SenateNFIP.pdf]
	asked by grandpa24551, 11/10/2007
Categories: Housing, Leisure and Lifestyle, Debt and Mortgages

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