Congress has passed a National Flood Insurance Program renewal bill that will not expire in 90 days. The program was set to expire at the end of July. With this new measure, Florida residents will not have to worry about gaps in coverage until Sept. 30, 2017. The bill also included several reform measures long sought by insurance companies, brokers and agents.
While the industry hailed the Biggert-Waters Flood Insurance Reform and Modernization Act of 2012, policyholders may not be as enthusiastic. Currently, NFIP premium increases are capped at 10 percent per year. Under the new law, the cap will increase to 20 percent. Under the new law, policyholders will have minimum deductibles, and some properties will no longer qualify for subsidies.
The challenge with NFIP for federal regulators is one that should be familiar to Floridians. If a homeowner wants flood insurance, NFIP is effectively the only game in town. Even if a homeowner doesn’t want flood insurance, NFIP will come into the picture: If a property is in a designated risk area, under federal law a buyer cannot obtain a mortgage without flood insurance.
NFIP has been on precarious financial footing since the 2005 hurricane season. In particular, Hurricane Katrina and the flood damage in New Orleans put the program into serious debt. One of the provisions of this new law calls for the program administrator to develop a plan to retire that debt.
Flood mapping has been a point of contention for years, and the law includes measures that should insure that mapping is improved through advanced technology and, it seems, whatever else it takes.
The law also calls on the Government Accountability Office to look into adding coverage to NFIP. Business interruption and additional living expenses could be on the horizon, depending on the outcome of the GAO’s research.
Source: Business Insurance, “5-year National Flood Insurance Program extension bill approved,” Mark A. Hofmann, June 29, 2012Share