NU Online News Service, may 24, 2:00 p.m. EDT

Decisions such as the Federal Emergency Management Agency's to delay charging market rates for policies sold in certain areas under the deficit-ridden National Flood Insurance Program, could become more common, an insurer group said.

An official of the Property Casualty Insurers Association of America warned that extensions like the two-year delay are likely to be the rule rather than the exception, at least until legislation as proposed in the House is finalized.

While the proposed legislation, H.R. 5414, calls for a 5-year delay in buying coverage in flood-prone areas, as well as a 5-year phase-in of market rates, it at least provides a road map for an eventual end of subsidies, said Don Griffin, PCI vice president of personal lines.

Currently, the NFIP is running a deficit of more than $18 billion, Mr. Griffin said.

The legislation he is talking about was reported by the House Financial Services Committee several weeks ago and is now awaiting House floor action. There is no companion bill in the Senate.

At the same time, the temporary extension of the NFIP program expires May 31. Congressional leaders plan to attach a provision extending the program until Dec. 31 in hopes that is sufficient time for a 5-year reauthorization to be enacted by Congress.

As a backup measure, both the House and Senate have introduced stand-alone bills extending the program until Dec. 31 that can be quickly acted on if Congress is unable to finish work on the omnibus tax and jobless bill it is now debating, according to industry officials.

The discounted or "preferred policy rate" is being made available to people required to buy flood policies in areas determined by new maps to be flood prone. The remapping was mandated by the 2004 reauthorization of the NFIP.

Mr. Griffin said they are getting the respite because the levees they live behind have not been certified as effective by federal inspectors.

The new maps went into effect after Oct. 1, 2008.

In order to be eligible for the discounted rates, the properties must also meet certain loss-history requirements, FEMA said. If there are two claims, or disaster relief payments for flood, of $1,000 or more, or three losses of any amount, the structure is ineligible for the PRP, it added.

Policyholders with a preferred rate policy will see a $10 increase when they renew their policies. This is the amount that was determined, through actuarial analysis, to be the amount needed in order for those buildings that are newly mapped into a SFHA to be revenue neutral to the flood insurance program.

Sen. Richard Durbin, D-Ill., assistant Senate majority leader, lauded the FEMA decision, and noted that he had been asking the agency for several years to delay charging market rates for people in areas that had been determined to be flood-prone under the new mapping mandates.

"In these tough economic times," many property owners in flood-prone areas in Illinois "are not able to afford the high-cost mandatory flood insurance," Sen. Durbin said.

"FEMA made the right decision in extending deeply discounted rates to homeowners and businesses once the new maps take effect," he said.

He added, however, that this is only a temporary solution. "The long-term solution is to bring the levees into a good state of repair so that the region is adequately protected," he said.

But, Jimi Grande, senior vice president, federal and political affairs, at the National Association of Mutual Insurance Companies, was critical.

"This decision, while understandable, will undoubtedly add to the already considerable deficit facing the NFIP," he said.

He added, "With the National Flood Insurance Program already unable to pay off its nearly $20 billion worth of debt, we would hope Sen. Durbin would put his energy into fixing the program with common sense reforms.

"Flood insurance premiums should recognize the risks of flooding to a property."

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Insurers Criticize FEMA's Delay Of Market Rates On Remapped Policies

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