“Over the past several years, Congress has been granting shorter and shorter reauthorizations for the vital program,” said PIA National President-elect Brian Marino, co-chair of the association’s natural catastrophe working group. “These recurring short reauthorizations and frequent lapses play havoc with real estate markets and put insurance agents and their clients who need flood insurance at a distinct disadvantage.”
“We are encouraged that there is finally a bill filed that begins to address program reforms and provides for a longer reauthorization,” Marino said.
There are now three bills pending in Congress that address the NFIP. One, a so-called tax extenders bill (H.R. 4213), would renew the flood program only through December 31, 2010. Another is the reform bill with a five-year authorization. A third bill by Rep. Gene Taylor (D-Miss.) would add wind perils to NFIP flood insurance policies.
A hearing on the NFIP will take place Wednesday, April 21 in the Housing and Community Opportunity Subcommittee of the House Financial Services Committee. The NFIP is the sole source for more than 95 percent of the flood insurance coverage available nationwide.
PIA prefers the five-year extension, opposes the addition of wind coverage to the NFIP and also favors forgiveness of the program’s debt.
Currently, only flood insurance is provided by the NFIP while wind perils are covered under homeowners’ insurance policies and statewide wind pools. PIA believes that combining the two perils in the NFIP would cause confusion and spur litigation.
“Having some policyholders’ flood and wind policies combined in the NFIP, some separated between the NFIP and state wind pools, and still others having only one coverage or the other is a recipe for marketplace chaos,” Marino said. “Uncertainty over which policy covers which losses would lead to an increase in coverage disputes and related litigation.”
PIA agrees with Homeland Security Secretary Janet Napolitano, who stated in a letter last year to House Financial Services Committee Chairman Barney Frank (D-Mass.) that “voluntary federal wind coverage would create significant problems involving coordination of benefits and adversely affect competition and selection among the various public and private wind programs.”
PIA also supports forgiveness of the NFIP’s approximately $20 billion in debt to ensure that the program can build reserves for future flooding events. Attributing the debts incurred by the flood insurance program to FEMA’s management of it ignores the fact that four extraordinary major hurricanes hit the United States in 2005 causing extensive flooding losses that exceeded reasonable reserving.