Whether the insurance industry will have certainty about theNational Flood Insurance Program (NFIP) is now in the hands of theU.S. Senate.

The House on July 12 passed legislation that would reauthorizethe NFIP until Sept. 30, 2016. But whether Congress can act on along-term reauthorization before the current program's extensionexpires Sept. 30 remains unclear.

The final House bill contains one potential historic shift inthe program: some movement toward privatization, at least throughreinsurance.

Regarding these privatization efforts, the Federal EmergencyManagement Agency (FEMA) is explicitly authorized under the measureto “carry out initiatives to determine the capacity of privateinsurers, reinsurers and financial markets to assume a portion ofthe flood-risk exposure in the United States.”

The bill “clarifies” the power of the FEMA administrator toutilize private-market reinsurance capacity to minimize thelikelihood that the program would need to borrow additional fundsfrom the Treasury.

Some interesting changes were made in the bill throughamendments on the House floor. Here are some critical ones (andsome rejected ones):

A key amendment approvedby the full House would require FEMA to find write-your-owncompanies to take over 832,000 flood policies formerly underwrittenby State Farm and its 17,000 agents.

The amendment requires FEMA to reduce the number offlood-insurance policies that are directly managed by it to notmore than 10 percent of the total number of flood-insurancepolicies in force. It would also require FEMA to refuse to acceptfuture transfers of policies to the NFIP Directprogram. 

The House also added a provision requiring theNFIP to create a reserve fund to handle catastrophic losses.

The Houserejected an amendment by Rep. Candace Miller, R-Mich.,that would have terminated the NFIP as of Jan. 1 and allowed statesto form interstate compacts to provide flood insurance.

Alsorejected was an amendment by Miller that would terminatecurrent spending on television and radio advertising that is usedto promote the NFIP in all 50 states. The vote was 238-186.

Anotheramendment that was defeated would have directed theGovernment Accountability Office to determine whether an “allperils” insurance-policy market should be created; that is, onethat would cover wind and water, as well as cover other claims, forexample, defective wall board. 

Alsodefeated was an effort to remove a provision added by theHouse Financial Services Committee when it took up the bill in Maythat added coverage for business-interruption and cost-of-livingexpenses.

NAIC Drops Support For Agent MLR Exemption

The National Association of Insurance Commissioners (NAIC) onJuly 12 decided not to support a recommendation of a special taskforce that would have put the NAIC on record as supporting Houselegislation exempting insurance agents from the medical-lossprovision of the healthcare-reform law.

Officially, the NAIC executive committee said “it chose not totake further action on the Task Force's recommendation, but tocontinue to work with [the U.S. Dept. of Health & HumanServices] (HHS) on other possible alternatives.” 

We checked in with various industry leaders to get their take onthe NAIC decision.

Janet Trautwein, CEO of the National Association of HealthUnderwriters (NAHU), says NAHU presented the NAIC and HHS with a120-page report showing the “devastating impact” the provision ishaving on health agents.

Florida Commissioner Kevin McCarty, who headed the NAIC taskforce, says he has not dropped support for the House bill, but isalso pursuing other alternatives that he hopes might bring quickerrelief to the agent community.

Ethan Rome, executive director of Health Care for America Now!,a consumer-oriented group, calls the decision a “victory forconsumers and businesses.”

Rome adds the legislation, sponsored by Rep. Mike Rogers,R-Mich., “asks members of Congress to pick winners and losers andpits brokers against consumers and all small businesses…The fact isthat the bill will take $1.3 billion in rebates from consumers andgive it to the insurance companies without any guarantees that itwill solve any of the problems that brokers haveraised.”