He said that "as it currently operates, the NFIP is not an insurance program," and given the nearly $18 billion debt the NFIP owes the Treasury Department, the program is "a millstone" on the federal budget and U.S. taxpayers.

"The fuller application of risk-based rates and an appropriate risk-bearing role for the private reinsurance sector would transform the program," Mr. Nutter said.

Ms. Jallick and Mr. Nutter made their comments on the proposed "Flood Insurance Reform Act of 2011" at a hearing on the legislation held by the Subcommittee on Insurance, Housing and Community Opportunity of the House Financial Services Committee.

Industry trade groups that testified at the hearing or submitted testimony included the Property Casualty Insurers Association of America (PCI), the RAA, the National Association of Mutual Insurance Companies (NAMIC), the American Insurance Association (AIA), and the Independent Insurance Agents and Brokers of America (IIABA).

Others that testified included representatives of the Federal Emergency Management Agency (FEMA) and the Government Accountability Office (GAO), as well as representatives of the mortgage-banking industry, flood-plain managers, realtors, homebuilders and the SmarterSafer Coalition.

Representing PCI and the Write-Your-Own industry, Ms. Jallick noted that there were four "lapses" in the program in 2010, "causing significant disruption in the vulnerable housing markets at a time when the U.S. economy—and particularly the housing sector—is struggling to recover from the recent financial crisis."

Representatives of insurance agent trade groups voiced general support for the draft legislation unveiled by House Financial Services Committee Republicans late this week.

Specifically, besides the five-year reauthorization of the program, they also supported provisions of the legislation that moved toward eliminating rate subsidies, indexing the maximum limits, providing for additional-living-expense and business-interruption coverages, and a method to address mapping issues.

They also weighed in on proposals to privatize the program, as outlined by Craig Fugate, FEMA administrator, and commented on by the RAA's Mr. Nutter.

Sandra G. Parrillo, president and CEO of the Providence Mutual Fire Insurance Company, testifying on behalf of NAMIC, said that as a "practical matter, there is no private residential market for flood insurance and efforts to create one will continue to be frustrated by rate regulation, adverse selection and capital constraints."

She said, however, that "other proposals that seek to explore a risk-bearing role for the private sector in the NFIP may have merit and should be given due consideration."

She said that ceding a portion of the NFIP's risk to the private sector through reinsurance and catastrophe bonds could reduce taxpayer exposure to future debt.

Spencer Houldin, chairman of the Government Affairs Committee for the IIABA and president of Ericson Insurance, which has offices in Connecticut and New York, said that the IIABA has met with many insurance carriers "who categorically state that the private market is simply unable to underwrite this inherently difficult catastrophic risk, especially in the most high-risk zones where it is needed."

"We do not, however, oppose the studies on private-market capacity as called for in the draft legislation.

"We believe that these studies will likely show that the private market cannot properly underwrite flood risks, but if it can be demonstrated that a private market could emerge in some way, we would welcome that discussion," he said.

In a statement, among other comments, the AIA asked why properties in newly designated special flood-hazard areas (the "newly mapped") will receive preferential treatment.

"Not only will such properties receive the rate phase-in, they will have the ability to avoid mandatory purchase altogether if their community objects," the AIA said.

"These aspects of the discussion draft seem inconsistent with the needed movement toward price reflecting risk and greater financial security for the program," the AIA statement concluded.

That provision in the draft bill was added at the demand of Rep. Candice Miller, R-Mich., whose Peninsula constituents are angry that remapping will raise the cost of flood insurance for them.

She introduced legislation in February, H.R. 435, which would repeal the NFIP after 2012 and would also immediately end all remapping of the program mandated by prior reauthorizations of the program.

The authority to charge more to current customers is based on the new maps that had been mandated by a 2003 law that remains in effect.