The 2016 election season won’t hamper ongoing work on renewing and reforming the U.S. government’s struggling National Flood Insurance Program well before it expires in September 2017, a leading Republican from the U.S. House of Representatives insists.
What’s more, a proposed bill could emerge by late fall.
Rep. Blaine Luetkemeyer (R-MO), vice chairman of the House Subcommitee on Housing and Insurance of the House Financial Services Committee, said on March 17 that he expects a number of meetings and hearings over the next several months to produce a proposed reform bill later this year.
The goal is to have a viable bill heading into 2017 that “we can actually work on and move forward on,” he told an audience at the 12th Annual Networks Financial Institute Insurance Public Policy Summit in Washington, D.C.
“To alleviate 11th-hour [scrambling], it is important to begin discussions sooner,” Luetkemeyer said.
What remains unclear at this point, however, is what a final reform bill will look like. The federal government’s flood insurance program is currently $23 billion in debt, something Luetkemeyer said can’t continue.
“Our job is to come up with a solution that minimizes [consumer] risk and maximizes their protection,” he added.
Luetkemeyer suggested that the government could be taken entirely out of whatever replaces the current NFIP entity.
“Reinsurance people are excited,” he told the audience. “Between reinsurance and cat bond programs, they have said there is enough money to take the government entirely out of this.”
Industry Flood Position
But the National Association of Mutual Insurance Companies is the among industry groups that support continuing some sort of federal flood insurance program. NAMIC’s position: the program is needed to make sure all homeowners can protect themselves from flood risk, but it must become fiscally stable. NAMIC also wants tweaks to the program, such as the phase-out of subsidies, save for a means-tested program that would provide subsidies for homeowners whose actuarial risk based rates are unaffordable.
There has been some movement regarding one potential change to the flood insurance status quo that would set guidelines for the alternative use of private insurance instead of the NFIP. Earlier in March, the House Financial Services Committee approved the Flood Insurance Market Parity and Modernization act (H.R. 2901 – also known as the Ross/Murphy bill), which would codify that private insurance can be treated the same as federal flood insurance where homeowners with federally-backed mortgages are required to buy the coverage.
The current mandatory purchase requirement doesn’t mandate NFIP insurance coverage, but mortgage lenders have generally only accepted NFIP policies, due to uncertainty whether private flood coverage satisfies current regulations.
The idea behind H.R. 2091 is that it will boost competition in the flood insurance market, giving an alternative for 4 million property owners who rely on the NFIP. It has received backing so far from groups such as the state insurance commissioners, plus taxpayer and environmental groups including Taxpayers for Common Sense and SmartSafer.NAMIC embraces the bill, as does the Property Casualty Insurers Association of America, which issued a statement urging the House to support H.R. 2901. Nat Wienecke, PCI’s senior vice president, federal government relations, dubbed it “bipartisan common sense legislation” that makes clear “the intent of Congress that private flood insurance should be an option available to consumers.” What is more, he said in a statement, the bill would give consumers extra options “and bring more private sector capital into this important market segment.”
Leigh Ann Pusey, president and CEO of the American Insurance Association, told Carrier Management in January at the Property/Casualty Insurance Joint Industry Form in New York City that she expects “a very contentious fight in Washington” on the reauthorization of the NFIP. To gain the upper hand, she said the industry could “take advantage of the year out to educate Capitol Hill a little bit about what’s going on in the market, and maybe help connect some dots a bit about what a real reform package might look like.”
Pusey added the questions Congress and the industry must jointly address with any program renewal include how to get transparency, certainty, and rate adequacy “in a way that has a long-term vision for the program, and most importantly, for consumers who need this product.”