The innovative and highly effective National Flood Insurance Program (NFIP) operated by the US Government is in danger of shutting down by the end of the month, and insurance groups are urging the Senate to act quickly to reauthorise the program.

The NFIP covers flood losses not typically insurable through other policies. Now the flood program is in danger because the Senate has dragged the chain on reauthorising it through to September 30 2008.

But the Senate appears incapable of doing anything quickly. For example, senators are still squabbling over what to do about the horrendous level of asbestos claims in the US which are forcing major manufacturers into bankruptcy.

The insurance groups have told Senate Majority Leader Bill Frist the multi-year extension of the NFIP authorisation “is vital both to protect homeowners from natural disasters and our nation’s economy from the economic consequences that can follow such disasters”.

The reauthorisation includes a $57 million pilot program to mitigate severe repetitive-loss properties by fixing them or buying them. Local communities and states would pay between 10% and 25% of the costs, with the Federal Government covering the rest. Owners who refuse mitigation would face a 50% increase in their premiums.

According to a Senate Banking Committee report, almost 50,000 properties experienced two or more flood claims that exceeded the $1,000 deductible in a 10-year period. Those properties cost the program $285 million each year.