WASHINGTON — Sen. Mike Rounds, R-S.D., suggested Tuesday that the National Flood Insurance Program should boost its insurance coverage to $427,000 from $250,000 in an effort to put it on sounder fiscal footing.
The suggestion from the conservative lawmakers sets up a potential battle with industry groups, however, that are lobbying to reduce the program's role in order to boost private market participants' role.
During a Senate Banking Committee hearing on the issue, Rounds cast it as a way to solve the flood insurance's economic problems.
"I am wondering if the National Flood Insurance Program should perhaps take a look at increasing the total amount of structure coverage in those areas where it would be perhaps more profitable to write and gain more premium dollars," Rounds said.
Roy Wright, deputy associate administrator of the Federal Emergency Management Agency, which oversees the National Flood Insurance Program, welcomed the suggestion.
"There is a real problem of under insurance," he said.
The $250,000 limit was set in 1994 and an equivocal amount would be $427,000 today.
"That is an adjustment I would be happy to work with you on," Wright told Rounds. "It would increase the revenue coming into the program and help us to be financially sound."
The National Flood Insurance Program is $24.6 billion in debt, and FEMA is currently borrowing from the U.S. Treasury to cover $400 million in interest payments a year.
But raising the cap on federal flood insurance runs counter to the agenda of the SmarterSafer coalition, which supports increasing the role of private flood insurance.
"We would oppose increasing the caps on the flood insurance program," said Jenn Fogel-Bublick, who represents the SmarterSafe Coalition. She a partner at Capitol Counsel LLC in Washington.
Lawmakers must soon decide what to do about the flood insurance program, which is slated to expire at the end of September.
So far, House and Senate banking committee members have been discussing ways to increase the roll private insurers play in the flood insurance market.
During Tuesday's hearing, Sen. Elizabeth Warren, D-Mass., stressed that it is more than just an insurance program. It also supports flood mapping, floodplain management and flood mitigation, she said.
"Each of these missions plays an important role in reducing flood risk and each is at least partially funded by user fees and surcharges," Warren said.
But private flood insurers currently do not undertake such work.
"I support private-sector insurance, but only if playing field is level" and if private flood insurers will help pay for the flood mapping, floodplain management and flood mitigation, Warren said.
Fogel-Bublick said the coalition would not object to supporting those programs.
Last week, Wright testified before the House Financial Services Committee and suggested that Congress should consider giving private flood insurers exclusive rights to insure newly constructed homes. That would give private insurers a good foothold in the housing market.
"Many want to see the private market expand. From a public policy perspective, the more people who are covered the better," Wright said.
Rounds cautioned, however, that insuring only older homes would increase the federal government's risk. "If the private insurers are taking the healthiest and most profitable premium dollars, that hurts you in the long run," the senator said.