The National Flood Insurance Program has been extended until 2017
Congress has approved a five-year extension of the National Flood Insurance Program which will allow it to continue until September 30, 2017. Included as part of the transportation conference report, the official name of the legislation is the “Biggert-Waters Flood Insurance Reform and Modernization Act of 2012.”
Congress originally created the NFIP in 1968 to address the increasing costs and damages caused by floods and not covered under the standard homeowner’s contract.
Bob Rusbuldt, Big “I” President & CEO commended both the House and Senate for passing the legislation. “A five year extension is of the utmost importance, as are the needed reforms to the program. The Big “I” strongly supports the legislation passed today and looks forward to the implementation of the many provisions that will help put the program on more solid financial footing.”
Tom Santos, vice president for federal affairs at the American Insurance Association was equally pleased with the results. “Congress recognized that reforms included movement toward fiscal soundness by elimination premium subsidies, and moving toward risk-based pricing are necessary for the long-term stability of the program. These reforms make significant progress towards protecting consumers and taxpayers, and improving the NFIP.”
Adds Santos, “The five-year extension will provide certainty in the flood insurance program thereby increasing consumer and business confidence in the NFIP.”
The R Street Institute also issued a release welcoming Congress ability to finally take action on measures to reform the National Flood Insurance Program. “This bill is imperfect and doesn’t go nearly far enough toward shielding taxpayers, ending environmentally destructive subsidies and transferring flood risks to the private market as we would like to see. It is, nonetheless, a step forward and Congress should be commended for taking that step,” said R.J. Lehmann, public affairs director of the R Street Institute.
The bill also seeks to make important reforms to the National Flood Insurance Program
In addition to extending the NFIP, the legislation also aims to make important reforms in order to modernize the 44-year old program. According to the Big “I” these reforms include:
- Phasing out subsidies for many properties;
- Raising the cap on annual premium increases from 10% to 20%;
- Allowing multi-family properties to purchase NFIP policies;
- Imposing minimum deductibles for flood claims;
- Requiring the NFIP administrator to develop a plan for repaying the debt incurred from Hurricane Katrina; and
- Establishing a technical mapping advisory council to deal with map modernization issues.
The Big “I” also notes that under this new legislation the Government Accountability Office will be required to conduct a study concerning on whether or not to add business interruption and additional living expenses coverages to the NFIP. The legislation also requires the Federal Insurance Office (FIO) to study and submit a report to Congress on natural disaster insurance issues as well as possible legislative solutions.
For The R Street Institute highlights the fact that the bill phases out premium subsidies for 355,000 second homes, commercial properties and severe repetitive loss properties among others over the next decade. It will also bar future subsidies for new flood insurance policies or to property owners who have allowed their subsidized policy to lapse. In addition, the NFIP will be required to build a fund reserve equal to 1% of its total obligations in order to better prepare for catastrophic losses. Finally, the bill opens up the possibility, however slightly, of permitting greater private sector participation in flood insurance risks.
Massachusetts made the top ten of NFIP flood insurance payouts in 2010.
In 2010, The Insurance Information Institute calculated that the average amount of flood coverage was approximately $220,577 and that the average premium was $594. Overall, the institute says that NFIP premiums have risen by some $1.7 billion over a ten year period from 2000 until 2010. As for the highest flood insurance payouts in 2010, the Insurance Institute says that Tennessee topped the list that year followed by New Jersey, Virginia, Texas, Rhode Island, Florida, Kentucky, Louisiana, Massachusetts and Illinois finishing out the top ten.
As for Massachusetts, it had a total number of 2,121 claims the National Flood Insurance Program with a total claims payment of $24.6 millions for 2010, which is the latest information available. It had 8,118 policies that could be categorized as direct NFIP business which translated into 1,838.2 millions of insurance in force as outlined in data presented by the Insurance Information Institute.