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Washington remains divided on NFIP as deadline nears

As Washington's fiscal clock ticks down to zero and the National Flood Insurance Program (NFIP) faces the end of its legal life next month, efforts to compel lawmakers to renew and reform the federally subsidised coverage have taken on fresh urgency.

Congress started its August recess with much work left to keep the NFIP from expiring on 30 September, prompting risk management society RIMS to urge members last week to back its push for legislative action. RIMS plans to begin asking members for donations to fuel the effort.

But time has grown critically short, and many other issues also demand lawmakers' attention as the federal fiscal year nears its 30 September end.

Washington insiders say lawmakers are gambling that they will find enough time to forge an NFIP deal and keep it alive past the impending deadline. And on many areas Democrats and Republicans agree - such as getting the NFIP to obtain reinsurance on at least part of its risks, as it did this year.

But significant sticking points remain. And while a renewal/reform package heads to the full House of Representatives for debate, the Senate's banking committee has yet to move a bill forward. The necessary procedural steps alone can eat up much time, even without adding contentious measures.

Republican Senate banking leaders have proposed a basic bill, but it doesn't include a core measure in the House package that would open the flood market to further private carriers or a more divisive plan to reduce the NFIP's future risk exposure.

Issues still unresolved in the House revolve around eligibility of properties for NFIP participation after 2021, how much rates can rise each year, and how to deal with the small number of single-family homes that have "severe repetitive claims" histories.

Studies have shown that about 9,000 primary residences out of roughly 5 million covered by NFIP policies account for approximately 30 percent of claims, and nearly all of them receive substantial subsidies. The agency paid out about $3.3bn in damage claims last year.

Lawmakers have grappled with these issues before without lasting success. A 2008 study said the NFIP covered about 7,000 "severe repetitive loss" properties that almost all receive substantial subsidies. Over 1,400 had by then collected cumulative payments ranging from $200,000 to more than several million dollars.

What to do with the $24.6bn in Treasury debt amassed by NFIP borrowing also remains unresolved, with Democrats pushing to write it off. NFIP administrators have had to borrow just to pay the $300mn in annual interest.

The NFIP collected about $4.3bn in premiums and fees last year but had about $5.7bn in costs, including $1.1bn paid to firms selling NFIP policies, according to the Congressional Budget Office.

Republicans and Democrats say they want to keep the NFIP alive, so lobbyists say it will likely be extended in its present form if time runs out. That has happened in the past, with 18 stop-gap extensions from 2008 to 2012.


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