U.S. insurer groups oppose Senate move delaying premium increases for flood insurance program

Two groups representing insurers in the United States have issued statements opposing the Senate’s move to delay premium increases for the government flood insurance program.

 The legislation passed by the U.S. Senate delays the implementation of the Biggert-Waters Flood Insurance Reform Act, signed into law in 2012.

Under that act, the National Flood Insurance Program would see premiums raised gradually to “risk-based levels for many subsidized flood insurance policies and requiring mitigation for repeatedly flooded properties,” a release from the National Association of Mutual Insurance Companies noted Thursday.

“The legislation approved today by the Senate doesn’t make flood insurance cheaper, it just makes the American taxpayer foot the bill for other peoples’ flood insurance,” Jimi Grande, senior vice president of federal and political affairs for NAMIC said in the press release.

“It continues to hide the true risk that homeowners in flood-prone areas are facing and removes incentives for homeowners to protect their properties from flooding.”

“Congress passed these reforms because the NFIP had become unsustainable, with a debt of more than $20 billion to the taxpayers that it had no hope of ever repaying,” Grande also said.

“The 2012 reforms will help the NFIP to raise revenue needed to meet its obligations to policyholders across the country. And as rates increase for some homeowners, it will also hopefully encourage them to mitigate against flooding and prevent a loss from happening in the first place.”

NAMIC says that as Biggert-Waters took effect, stories of extreme premium increases were reported and that the U.S. Congress should work to address those cases.

“As happens in reform legislation, some extreme cases will arise as an unintended consequence,” he said.

“Congress should absolutely help those facing true hardship, but the Senate bill doesn’t do that. It doesn’t address any of the reasons properties are at such a high risk of flooding, and it won’t help a single homeowner protect his or her home or belongings from a flood. Instead, it lets elected officials say they lowered flood insurance premiums during an election year.”

Also Thursday, the Property Casualty Insurers Association of America released a statement opposing the Senate’s move.

Earlier this year, the association says it wrote each member of the Senate offering the technical assistance of PCI’s member companies to modify S.1926. “These critical common sense technical amendments are necessary to address the ‘unintended consequences’ of the Biggert-Waters and ensure that a new round of ‘unintended consequences’ do not adversely impact housing and insurance markets throughout the country,” Nat Wienecke, senior vice president of federal government relations with PCI commented in the group’s release.

“It is also very important that policymakers realize and acknowledge that any changes to the NFIP will take no less than six months to be implemented once the NFIP provides the necessary guidance. S. 1926 provides no guidance to FEMA as to how it is to be implemented and creates no mechanism to require FEMA to allow community and stakeholder comment before finalizing implementation and rate-setting determinations.

“PCI is disappointed that the amendment offered by Senator Toomey was not adopted prior to the passage of S.1926,” Wienecke added.

“Only this amendment explicitly recognizes the technical and timing realities of implementing any programmatic changes to the NFIP. In addition, the amendment would have put properties on a ‘glide-path’ that would allow the responsible phase-in of Biggert-Waters’ rate increases while FEMA works to complete the vital affordability study mandated by Biggert-Waters and expressly funded by S.1926.

“In addition, the amendment offered by Senator Toomey would set flood insurance rates on a path likely to incent the gradual expansion of a private market for flood insurance. The implementation mechanisms included in the amendment – both technical and substantive – provide the best path forward to allow the gradual implementation of Biggert-Waters’ combined goals of addressing long-term NFIP solvency and flood insurance affordability.”

The group said it will continue to work with the government on changes to make flood insurance sustainable.