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Monday, January 27, 2014

GAO Report: Strategies for Increasing Private Sector Involvement

This month the Government Accountability Office (GAO) released a report detailing how the private sector could become more involved in flood insurance. According to the report, "Stakeholders identified several strategies that could help create conditions that would promote the sale of flood insurance by the private sector. For example,
  • NFIP charging full-risk rates. Congress could eliminate subsidized rates, charge all policyholders full-risk rates, and appropriate funding for a direct means-based subsidy to some policyholders.
  • NFIP providing residual insurance. The federal government could also encourage private sector involvement by providing coverage for the highest risk properties that the private sector is unwilling to insure.
  • NFIP as reinsurer. Alternatively, the federal government could serve as a reinsurer, charging a premium for assuming the risk of catastrophic losses. However, the cost of reinsurance premiums would likely be passed on to consumers, with higher rates potentially decreasing consumer participation."
Read the GAO Report.