Congress hasn’t exactly set the world on fire in dealing with much needed reforms to National Flood Insurance Program (NFIP). In fact, the NFIP has just received a fifth temporary extension since expiring in September of last year.
The House has already passed a reauthorization bill but the Senate has not acted other than to vote to temporarily extend the program. So now, sadly, with no reforms in place nor any promise of much needed changes in the future, the nation is rushing toward the next hurricane season.
The Trump administration has decided to bypass Congress and see what it can get done. That move — says NFIP Administrator Roy Wright — is to try to get more private insurance involved. “On the one side, more people need insurance coverage. Secondly, there should be more private capital backing that risk,” he said.
One thing Wright is doing — via administrative rules — is loosening restrictions on private insurers who want to offer their own coverage. He’s done it via a lifting of the non-compete policy that limited what insurers could do if they sold flood insurance under the Write Your Own (WYO) program.
Robert Gordon of the Property Casualty Insurers Association of America (PCI) said it is a change insurers have wanted and that they’ve been pushing Congress to approve. He said it will “allow companies willing to take on flood insurance risk the ability to do so.”
Wright agrees and calls it a “mutual gain. We need more people selling these products.”
An idea that isn’t going to be popular with the independent insurance agents of the PIA is the suggestion of a compensation cutback to insurers for selling NFIP policies in exchange for doing away with the non-compete. That usually translates into commission cuts for agents.
The administration is also making other changes. FEMA is trying to fix the system so there won’t be such huge payouts if another Hurricane Harvey hits. Harvey’s destruction forced FEMA and the NFIP to borrow more money from theTreasury to pay for flood damages.
Hurricane Harvey and the other hurricanes last year cost the NFIP $10 billion but the federal government cancelled $16 billion of the debt when the program hit its $30 billion borrowing limit. Even with that the NFIP remains $24.6 billion in the hole.
Way before Hurricane Harvey hit FEMA set up a reinsurance program for private insurers that provided $1 billion in coverage. This year FEMA is going to expand the reinsurance program and is looking at even deeper moves to other areas to limit the federal government’s exposure.
Source link: Politico