US insurance leaders have welcomed the introduction of revised legislation on the National Flood Insurance Program (NFIP), saying reform is vital for its survival.

Industry and government officials spoke about the proposed legislation before the Congressional Subcommittee on Insurance, Housing and Community Opportunity.

Chairman Judy Biggert told the meeting there was no question reform is needed in order for the NFIP to continue.

“It’s crucial we work to restore it before the September 30 expiry date,” she said. “People can ill-afford for the program to lapse.”

Ms Biggert says for many years the program has been struggling “under water” and it’s vital to address some of the NFIP’s financial and management issues.

Legislation currently before the committee suggests the program should be extended for another five years, and looks at introducing a more risk-based premium structure.

Government Accountability Office (GAO) MD Orice Brown says the magnitude of the NFIP’s debt – $US17.8 billion ($18.1 billion) – highlights the growing financial problems with the program.

However, the GAO has already identified several policy areas that needed addressing, including changing current premium rates to reflect the actual risks.

“The NFIP does not charge all program participants rates that reflect the full risk of flooding to their property,” Ms Brown said.

Independent Insurance Agents & Brokers of America spokesman Spencer Houldin says the NFIP remains a vital part of covering devastating losses from catastrophes.

He told the hearing the insurance industry continues to be largely unable to write flood insurance because of the nature of these losses.

“The NFIP is virtually the only way for people to protect against the loss of their home or business due to flood damage.”