The US Government has extended its National Flood Insurance Program (NFIP) for five years and will allow it to buy reinsurance cover from the private market.

The NFIP authority will evaluate the capacity available from private reinsurance, capital and financial markets to support the program.

It will conduct an annual assessment of its claims-paying capacity, including the role private reinsurance could play.

Reinsurance Association of America (RAA) President Frank Nutter has welcomed the decision.

“The RAA has consistently lobbied for the NFIP to address its volatility, exposure to extreme events and significant dependence on taxpayer-funded federal debt through risk transfer to reinsurance and capital markets,” he said.

The program is nearly $US18 billion ($17.5 billion) in debt. Reforms approved to address the debt include eliminating subsidies for some properties and allowing the maximum annual premium increase to rise from 10% to 20%. 

Nearly 20,000 flood-prone US communities participate in the NFIP by adopting floodplain management ordinances to reduce future damage.

In exchange, the NFIP makes federally backed flood insurance available to homeowners, renters and business owners in these communities.

The NFIP also maps the country’s flood plains.

The program has been allowed to lapse several times and has been given only short-term extensions since its last long-term authorisation expired in 2008, meaning the five-year extension will provide certainty to the scheme.