The Property Casualty Insurers Association of America (PCI) said it is urging Congress to adopt a widespread series of reforms for the ailing National Flood Insurance Program before this year's hurricane season starts.
Lawmakers recently authorized more than $25 billion in borrowing authority for the NFIP to satisfy contractual obligations and relieve the financial strain on the agency in the aftermath of Hurricanes Katrina, Rita and Wilma.
PCI said wrangling over the agency's borrowing authority threatened to delay claims payments to many Gulf Coast consumers and hampered the reconstruction effort.
The group said with another severe storm season predicted, improving the federal flood program is “a critical component of the nation's effort to recover from the financial devastation wrought by natural disasters.”
Some NFIP reforms are currently under consideration by Congress, but PCI said given the potential for devastation during this year's hurricane season, combined with the recent torrential rains on the West Coast, it is urging House and Senate members to consider more comprehensive reforms to the 40-year-old program.
“The NFIP has served consumers well, but it must be updated to respond to the needs of individuals and businesses across the U.S.,” PCI President and Chief Executive Officer Ernie Csiszar said.
The increased likelihood of a major hurricane striking the Northeast, and unprecedented rains threatening levees and dams in the West “demonstrate that a growing number of consumers are exposed to flood risk and that the NFIP is in desperate need of reform,” said Mr. Csiszar.
He added, “Consumers, taxpayers and insurers are not well served by a program that needs constant congressional intervention just to pay legitimate claims. The NFIP is critically important to Americans and the U.S. economy, and Congress needs to update it to reflect today's risks.”
PCI said it is urging Congress to adopt reforms, including:
o Revised building codes and mitigation requirements as a condition for disaster assistance to be provided to a community.
o The elimination of NFIP subsidies to properties in excessively risky areas.
o An increase in funding to ensure the quick completion of new flood plain maps.
o Increasing the mandatory purchase requirement to ensure that all properties at risk carry some amount of flood insurance.
o Increasing the maximum coverage limits above the current $250,000/100,000 limits for residential property to accommodate increasing property values.
o Establishing a single, higher deductible with options and surcharges.
o Making policy rating simpler and less cumbersome so agents can easily rate a policy accurately and quickly.
o Changing disaster assistance procedures to make sure that those with flood insurance are paid ahead of those who have not purchased flood insurance.
o Providing more educational materials and strengthening requirements for flood protection.
Such reforms would make the NFIP more actuarially sound and more effective at serving both consumers and taxpayers, Mr. Csiszar said.
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