NAFCU has voiced strong support for legislation introduced this week in both the House and Senate that would effectively delay for perhaps four years most flood insurance rate increases mandated by a 2012 law reauthorizing the National Flood Insurance Program.
NAFCU President/CEO Dan Berger said Tuesday the current law imposes an unacceptable financial burden on some credit union members.
However, an official of the trade group that represents the U.S. reinsurance industry said blanket subsidies for people who need flood insurance is not a good idea.
And, in Florida, two companies, one with ties to Lloyd’s of London, said they will offer private flood insurance at rates similar to what would be charged under the NFIP if the Biggert-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 not to be named said the fact that the bill was introduced after the rates began to go into effect is raising concerns at the Federal Emergency Management Agency, which runs the program, as well as among write-your-own insurers and agents who sell the program and handle claims and the companies that provide the back-office help needed to help the WYO companies and agents do their jobs.
“It is not clear what will happen to policyholders who have already seen rate increases or whether or not the real estate folks will be satisfied by this legislative proposal,” one industry official said.
There is also the issue of the vehicle - what trolley will sponsors of the legislation use as a vehicle to get to try to get this through Congress, and when will that happen?” the official asked.
The official said, “Each month that goes by another 400,000 renewal notices going out under the current B-W. And if they pass something, how long will it take for FEMA to issue direction to the WYOs? Four months, six months? Eight?”
The bill has nine Senate co-sponsors and 82 House co-sponsors.
The bill is the Menendez-Isakson “Homeowner Flood Insurance Affordability Act.”
The bill delays the “most dangerous rate increases under the Biggert-Waters Act until FEMA proves its flood maps are accurate and understands the impacts these drastic rate increases will 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 a future our communities can count on.”
In his statement, Berger said the bills are a “huge first step in helping millions of credit union members who may face untenable jumps in flood insurance premiums.”
He said NAFCU supports a delay in implementing rate increases “until such time that further study can be done to address how a reasonable flood insurance program can be sustained. We hope that this legislation can be advanced in a timely manner.”
But, Frank Nutter, president of the Reinsurance Association of America, is urging Congress to stay the course with the reforms.
He said that “to be fair to American taxpayers and those who have embraced appropriate flood plain management practices, the NFIP must have fiscal integrity, and phasing in risk-based rates is the logical way to accomplish this.”
Nutter said that if there are cases of severe economic hardships due to the proposed rate increases, the federal government should target the assistance on a means-tested, transparent basis, rather than provide blanket subsidies or opaque rate subsidies.
“To do otherwise will only further de-stabilize the precarious financial position of the program,” Nutter said
Nutter further suggested that because the private reinsurance industry has an interest in underwriting NFIP flood risk, Congress should not delay the implementation of the Biggert-Waters provision that mandates FEMA to assess privatization options.
Next Page: Private Insurers Step Up
That is what is happening in Florida. Spurred by state insurance commissioner Kevin McCarty and others in the Florida government, Tampa-based Homeowners Choice, a publicly traded company with about 140,000 policyholders statewide, wants to add an endorsement to its homeowners policies to include flood coverage, the Tampa Bay Times said.
The Times said state regulators must first approve its application. The newspaper said that Paresh Patel, chairman and chief executive officer of the insurer's parent company, HCI Group, said the new opportunity is aimed at helping HI serve its current policyholders.
"While we cannot provide a solution to all of Florida, we can — and will — try to help our policyholders hit hardest by hefty rate increases under the National Flood Insurance Program. We plan to enter the market cautiously and focus, as we always have, on our strict underwriting guidelines and calculated risk management," Patel told the Times.
The Flood Insurance Agency, a Gainesville-based firm, likewise says it could save customers thousands of dollars compared with National Flood Insurance Program premiums for those who have lost their subsidies, the paper said.
Since launching the program statewide Wednesday, the company has fielded roughly 150 phone calls from potential customers and independent agents seeking to market its policies, CEO Evan Hecht told the Times.
The agency is technically acting as exclusive administrator for a program backed by insurance giant Lloyd's of London, giving it a strong financial footing.
The offer is not without risks, however. As a surplus-lines carrier, Hecht's company is not overseen by state insurance regulators and does not need state approval for rate changes.
It is being backed by Lloyd’s of London as Lloyd’s Private Flood.
A lawyer for Lloyd’s in Washington, D.C., said there are several other Lloyd’s coverholders writing private flood insurance elsewhere in the U.S.
And, federal banking regulators recently proposed a rule that will allow mortgage servicers to accept private flood insurance for mortgages insured by the federal government. The regulation was mandated via a provision of the B-W law.