Filed Under:Risk Management, Corporate Risk

Groups join to push Flood insurance reform

In NFIP discussions, unity is as important as mitigation, privatization, mapping and other issues, groups say.
In NFIP discussions, unity is as important as mitigation, privatization, mapping and other issues, groups say.

Legislators and stakeholders would like to get a bill extending and reforming the National Flood Insurance Program (NFIP) put together this year, with the understanding that action on it would in all likelihood occur in 2017, representatives of various industries said yesterday.

During a media advisory call March 5, Steve Ellis, vice president of Washington, D.C.-based Taxpayers for Common Sense, which defines itself as a nonpartisan budget watchdog, said no one in the process wants to see a repeat of the last time the NFIP expired, when it took nearly four years, four lapses and 17 short-term extensions before a long-term reauthorization was put in place. But Ellis said there’s also recognition that 2016 is an election year. “At some point this year, basically everything will stop in Congress.”

Taxpayers for Common Sense is a member of the SmarterSafer.org, a coalition of environmental, insurance and other groups that promote environmentally responsible, fiscally sound approaches to natural catastrophe policy.

Ellis and Maria Wells, broker/owner with Stuart, Fla.-based Lifestyle Realty and chair of Chicago-based National Association of Realtors’ Insurance Committee, said it will be helpful to have legislation on the table this year that can be picked up and worked on when a new president and new Congress begin work in 2017. Wells said that is the goal of Rep. Blaine Luetkemeyer, R-Mo., chairman of the Housing and Insurance Subcommittee of the House’s Financial Services Committee.

Privatization

Wells added that the feeling right now is there is a lot of talk around greater privatization of flood coverage among legislators, and that is an effort the Realtors group is encouraging. However, she said those privatization efforts are stuck until two issues are addressed: grandfathering for continuous coverage and lender approval.

Related: Will new Flood bill lead to privatization of coverage?

Potential solutions to both of these issues are included in H.R. 2901, the Flood Insurance Market Parity and Modernization Act, which passed through the House Financial Services Committee last month and received supportive comments from industry representatives on the March 5 call. On the lender approval issue, the bill clarifies that privately issued flood insurance meets lenders’ mandatory purchase requirements. With respect to grandfathering for continuous coverage, the bill stipulates that if someone leaves the NFIP to get a private flood policy approved by a state regulator, that person can later return to the NFIP and retain any subsidy status they held before leaving the NFIP.

Wells, Ellis and Josh Saks, legislative director for Reston, Va.-based National Wildlife Federation, which is a SmarterSafer Coalition member, want the ultimate focus to be on bringing all interests together to get an NFIP extension and reforms passed without the disruption experienced last time.

 “Last time we didn’t have reauthorization, it cost 40,000 homes a month we couldn’t close on, which, economically, is huge,” Wells said yesterday. With that in mind, she said the National Association of Realtors came together with SmarterSafer this time around on common ground. “In the past, we’ve had our differences,” she noted, “but now we’re future-focused.” She said if the associations represented on the call yesterday can work together, then lawmakers should be able to do the same and work across the aisle to make sure homeowners are protected.

Risk mitigation

The associations’ representatives also spoke yesterday about the importance of risk mitigation, although there was not too much in the way of specifics. Saks pointed out that the Federal Emergency Management Agency has existing mitigation programs, and efforts could be made to bolster those programs and make sure they are adequately funded and applied.

He also said legislators could look into growing the NFIP’s Community Rating System. Under this program, communities take mitigation steps above minimum NFIP standards, and those within the community receive credits to reduce rates.

Wells stressed that mitigation is not a “one size fits all” proposition for communities, “because mitigation can be very costly to a community if it’s not done correctly.”

Saks talked about using natural barriers to mitigate flood damage, which is not only effective in protecting communities, but is also in line with his organization’s goal of protecting wildlife and wildlife habitats.

Ultimately, the disparate groups representing various interests that spoke yesterday are interested in a multifaceted approach that addresses all sides of the issue, from mapping, to privatization, to mitigation, to affordability. Saks pointed out that while he likes the ecological and conservation benefits of mitigation, for example, he recognizes mitigation also keeps insurance rates lower, which dovetails with the interests of other groups.

“Working together like this makes sense,” Saks said.  

Wells added, “We’re focused on the entire picture — we just know there has to be things we can actually present to [legislators] to do. Mitigation and flood mapping happen to be two that are huge that we think can be tackled and possibly put in a bill for next year.”

Related: Changes are coming to NFIP on April 1. Are you ready for them?

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