Industry Applauds Legislation to Extend and Reform Flood Program

The Senate on Tuesday passed legislation to extend and reform the National Flood Insurance Program (S.2284 - Flood Insurance Reform and Modernization Act of 2008). The bill provides for a five-year reauthorization of the National Flood Insurance Program (NFIP) beyond its September 30 expiration and includes several reforms. In response to the Senate's legislation, the insurance industry has already begun weighing in.  
  
"Legislation to extend and reform the National Flood Insurance Program will go a long way toward alleviating some of the concerns of residents in flood-prone areas, commented the National Association of Mutual Insurance Companies (NAMIC)" in its press release applauding the Senate passage of the proposal.  
  
The Property Casualty Insurers Association of America (PCI) followed suit:  
  
“PCI supports reforming the flood program to shore up its solvency for the foreseeable future and continue to help consumers in need, and this bill will accomplish that goal,” said David A. Sampson, PCI’s president and CEO. “We thank the Senate for its vote today, and in particular we commend Banking Committee Chairman Chris Dodd, Ranking Member Richard Shelby, and their colleagues for working together on a bipartisan basis to pass this crucial bill. We support the proposal to move forward with needed reforms, and we urge the House to work with the Senate to produce a bill that the Bush Administration can sign into law.”  
  
The legislation requires the government to update the nation’s flood maps, phase-in actuarially sound rates for non-residential and non-primary residences, and increase penalties for financial institutions for non-compliance. It also forgives the NFIP’s debt, estimated at more than $18 billion.  
  
“These reforms will bring this vital program into the 21st century,” said said Carl Parks, NAMIC’s senior vice president for government affairs. “It also puts the program on a path to a sound financial future.”  
  
Parks also commended the Senate for rejecting attempts to add windstorm coverage to the program. “Including wind coverage in the NFIP would likely have serious long-term repercussions for the program, from which it might not be able to recover,” he said. “Increasing the NFIP’s loss exposure would drive the program deeper into debt, probably leading to the end of the NFIP.”  
  
The PCI does have some concerns about the bill, specifically about language recently added to the bill that would create an insurance advocate to oversee the small number of private Write Your Own (WYO) companies that write policies on behalf of the NFIP. “We believe that the creation of an overseer is redundant,” Sampson said. “Consumers already have five options for redress. This would be a sixth. The amendment creates a special investigator whose domain would include fewer than 100 companies who administer this program. With fewer than 100 WYO companies, it would not take long for everyone selling these policies to come under the federal microscope, regardless of whether added scrutiny is needed or not. We will work toward the modification of that language in the final bill.”  
  
The House and Senate must work quickly to produce a unified bill for President George W. Bush’s signature.