PROPERTYCASUALTY360.COM NATIONAL UNDERWRITER | FEBRUARY 2017 | 39
Last year, renewal discussions for the National Flood Insurance Program (NFIP) got off to an early and — by most accounts — very productive start.
Both Congress and the insurance industry sought to
avoid the four years of program lapses and short-term extensions that preceded 2012’s reauthorization, and there
was a clearer understanding among legislators and industry representatives about the flood program, its shortcomings, and what some realistic solutions might look like.
Now with the Sept. 30, 2017 deadline for renewal
looming larger, P&C industry representatives say they
are focused on turning 2016’s favorable discussions into
substantive action — with the aim of securing both a
timely NFIP extension and key reforms that would allow
for a more robust private Flood-insurance marketplace.
“I don’t know if we’re all on the same page, but we’re
not in the conflict stage that we’ve sometimes been on
this,” Frank Nutter, president of the Reinsurance Association of America (RAA), says of the discussions so far
between the industry and legislators. While all the players
have yet to see the proposed bill, much less weigh in on
it, the mood feels more positive than last time the NFIP’s
authorization expired, he adds.
The reauthorization talks are taking place as the
program finds itself $1.6 billion further in debt, borrowing
that amount from the Treasury Department in January
to help cover 2016 expenses. The NFIP’s total debt is
now approaching $25 billion, stemming mostly from two
events: 2005’s Hurricane Katrina (over $17 billion) and
2012’s Superstorm Sandy ($6 billion).
The program’s fiscal troubles have led to increasing
calls by key members of Congress for reforms, including a
larger role for insurers in covering flood risk. The chal-
lenge is balancing what insurers would need to compete in
a healthy Flood insurance marketplace with what legisla-
tors are willing to pass.
WHO WANTS WHAT
Don Griffin, vice president, personal lines for the Property
Casualty Insurers Association of America (PCI), outlines
what the insurance industry would like to see from NFIP
discussions in order for it to realistically compete in a
Flood insurance marketplace:
•;An NFIP extension, for five years if possible, which
would bring stability to the flood marketplace as
private insurers try to launch products;
•;Continued commitment by Congress to achieve
actuarially sound rates for risks, a process begun
with the Biggert-Waters Flood Insurance Reform
Act of 2012 (BW- 12), but rolled back some in 2014;
•;A smoother process for risks that move from the
NFIP to the private market and then back again.
Currently, NFIP policyholders lose their grandfa-
thering status, and therefore any premium subsi-
dies they might have received, if they decide to buy
a private flood policy and then decide to go back to
the NFIP; and
•;Passage of H.R. 2901, the Flood Insurance Market
Parity and Modernization Act (H.R. 2901 in the
114th Congress), which clarifies language in
BW- 12 and makes clear that lenders may accept
privately issued Flood insurance to meet their
mandatory purchase requirements.
Various legislators, meanwhile, have their own priori-
WITH THE NFIP DEADLINE IN SIGHT, THE P&C INDUSTRY HOPES LAST YEAR’S
PROGRESS TRANSLATES TO 2017 ACTION. BUT WILL BEST INTENTIONS
FINALLY LEAD TO A HEALTHY PRIVATE MARKET?
BY PHIL GUSMAN