Legislation to reform and reauthorize the National Flood Insurance Program passed by the House Financial Services Committee today will take steps to improve the program for consumers, companies, and taxpayers, according to the National Association of Mutual Insurance Companies.
“Today’s vote by the House Financial Services Committee represents a positive step in the evolution of the National Flood Insurance Program,” said Jimi Grande, senior vice president of government affairs for NAMIC. “The legislation approved today allows property owners and communities to continue to mitigate their risk of flooding, while at the same time maintaining the availability of affordable flood insurance coverage for those who need it.”
The committee approved several measures that, combined with two bills approved on June 15, will bring needed reforms to the program and reauthorize it for five years. For homeowners, the reforms would lower the cap on annual rate increases, establish a limit on the maximum rate a property owner could be charged annually, and allow states to undertake pilot programs to provide financial assistance to those who need it. For taxpayers, the legislation seeks to limit the program’s exposure from new, high-end, and repetitive-loss properties and encourages the NFIP to take advantage of reinsurance and other alternative risk-spreading measures to ease the NFIP’s reliance on the U.S. Department of the Treasury. To mitigate or prevent future losses, the legislation would require more communities to enact flood mitigation plans and offer additional optional coverage to account for stronger building codes when rebuilding structures after a flood. In addition, stricter land rules would be imposed for areas at high risk of flooding.
“It’s been known for years that a small percentage of properties have accounted for a significant portion of the NFIP’s more than $24 billion of debt,” Grande said. “We have been facilitating and subsidizing development in risky areas for decades. We cannot simply pull the rug out from under these people, but we cannot let the situation continue as is.”
The legislation also takes important steps toward facilitating an environment in which private-sector companies, including those that currently offer NFIP coverage through the Write Your Own program, can develop and offer their own policies outside of the program. The elimination of the non-compete clause for WYO companies, clarification that private policies are acceptable for meeting mandatory purchase requirements, and FEMA’s sharing of historical loss data are all prerequisites for private companies considering offering flood coverage.
“The important reforms passed by the committee today are the first steps necessary to putting the NFIP on a path to solvency and ensuring the continued protection of millions of homeowners and their communities,” Grande said.
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