NAFCU has voiced strong support for legislation introduced thisweek in both the House and Senate that would effectively delay forperhaps four years most flood insurance rate increases mandated by a 2012 law reauthorizing the National FloodInsurance Program.

NAFCU President/CEO Dan Berger said Tuesday the current lawimposes an unacceptable financial burden on some credit unionmembers.

However, an official of the trade group that represents the U.S.reinsurance industry said blanket subsidies for people who needflood insurance is not a good idea.

And, in Florida, two companies, one with ties to Lloyd's ofLondon, said they will offer private flood insurance at ratessimilar to what would be charged under the NFIP if theBiggert-Waters Act of 2012 had not mandated much higher rates,according to the Tampa Bay Times.

At the same time, an insurance industry official who asked notto be named said the fact that the bill was introduced after therates began to go into effect is raising concerns at the FederalEmergency Management Agency, which runs the program, as well asamong write-your-own insurers and agents who sell the program andhandle claims and the companies that provide the back-office helpneeded to help the WYO companies and agents do their jobs.

“It is not clear what will happen to policyholders who havealready seen rate increases or whether or not the real estate folkswill be satisfied by this legislative proposal,” one industryofficial said.

There is also the issue of the vehicle – what trolley willsponsors of the legislation use as a vehicle to get to try to getthis through Congress, and when will that happen?” the officialasked.

The official said, “Each month that goes by another 400,000renewal notices going out under the current B-W. And if theypass something, how long will it take for FEMA to issue directionto the WYOs? Four months, six months? Eight?”

The bill has nine Senate co-sponsors and 82 Houseco-sponsors.

The bill is the Menendez-Isakson “Homeowner Flood InsuranceAffordability Act.”

The bill delays the “most dangerous rate increases underthe Biggert-Waters Act until FEMA proves its flood maps areaccurate and understands the impacts these drastic rate increaseswill have on individual policy holders and the program at large,”according to its chief Senate sponsors, Sen. Robert Menendez(D-N.J.) and Sen. Johnny Isakson (R-Ga.)

They said the legislation “is about fairness and building afuture our communities can count on.”

In his statement, Berger said the bills are a “huge first stepin helping millions of credit union members who may face untenablejumps in flood insurance premiums.”

He said NAFCU supports a delay in implementing rate increases “untilsuch time that further study can be done to address how areasonable flood insurance program can be sustained. We hope thatthis legislation can be advanced in a timely manner.”

But, Frank Nutter, president of the Reinsurance Association ofAmerica, is urging Congress to stay the course with thereforms.

He said that “to be fair to American taxpayers and those whohave embraced appropriate flood plain management practices, theNFIP must have fiscal integrity, and phasing in risk-based rates isthe logical way to accomplish this.”

Nutter said that if there are cases of severe economic hardshipsdue to the proposed rate increases, the federal government shouldtarget the assistance on a means-tested, transparent basis, ratherthan provide blanket subsidies or opaque rate subsidies.

“To do otherwise will only further de-stabilize the precariousfinancial position of the program,” Nutter said

Nutter further suggested that because the private reinsuranceindustry has an interest in underwriting NFIP flood risk, Congressshould not delay the implementation of the Biggert-Waters provisionthat mandates FEMA to assess privatization options.

Next Page: Private Insurers StepUp

That is what is happening in Florida. Spurredby state insurance commissioner Kevin McCarty and others in theFlorida government, Tampa-based Homeowners Choice, a publiclytraded company with about 140,000 policyholders statewide, wants toadd an endorsement to its homeowners policies to include floodcoverage, the Tampa Bay Times said.

The Times said state regulators must first approve itsapplication. The newspaper said that Paresh Patel, chairman andchief executive officer of the insurer's parent company, HCI Group,said the new opportunity is aimed at helping HI serve its currentpolicyholders.

“While we cannot provide a solution to all of Florida, we can —and will — try to help our policyholders hit hardest by hefty rateincreases under the National Flood Insurance Program. We plan toenter the market cautiously and focus, as we always have, on ourstrict underwriting guidelines and calculated risk management,”Patel told the Times.

The Flood Insurance Agency, a Gainesville-based firm, likewisesays it could save customers thousands of dollars compared withNational Flood Insurance Program premiums for those who have losttheir subsidies, the paper said.

Since launching the program statewide Wednesday, the company hasfielded roughly 150 phone calls from potential customers andindependent agents seeking to market its policies, CEO Evan Hechttold the Times.

The agency is technically acting as exclusive administrator fora program backed by insurance giant Lloyd's of London, giving it astrong financial footing.

The offer is not without risks, however. As a surplus-linescarrier, Hecht's company is not overseen by state insuranceregulators and does not need state approval for rate changes.

It is being backed by Lloyd's of London as Lloyd's PrivateFlood.

A lawyer for Lloyd's in Washington, D.C., said there are severalother Lloyd's coverholders writing private flood insuranceelsewhere in the U.S.

And, federal banking regulators recently proposed a rule thatwill allow mortgage servicers to accept private flood insurance formortgages insured by the federal government. The regulation wasmandated via a provision of the B-W law.