Four bills reintroduced this week to the US congress have proposed a number of reforms to the National Flood Insurance Program (NFIP), among which is the strengthening of FEMA’s authority to purchase reinsurance.
The bills were put forward by Missouri Congressman Blaine Luetkemeyer, who asserted that the NFIP has been “mismanaged for decades.”
“Despite bipartisan calls for comprehensive reform, worthwhile action has yet to be taken in Congress,” Luetkemeyer said.
“These bills would bring meaningful, permanent change to the program and make the NFIP more financially sound, give power back to the local officials it affects, and protect American taxpayers from paying for future flood losses.”
The Taxpayer Exposure Mitigation Act requires FEMA to purchase reinsurance or some capital market alternative to protect taxpayers from footing the bill for future losses.
“As communities and families across the country continue to face devastating floods, we thank and commend Congressman Luetkemeyer for his continued leadership, strong support and advocacy for the NFIP Reinsurance Program, and for introducing the ‘Taxpayer Exposure Mitigation Act’ to enhance it,” said Frank Nutter, President of the Reinsurance Association of America.
“We strongly believe in the value of the Reinsurance Program and appreciate that the bill includes important factors for FEMA to consider as part of risk transfer,” Nutter continued. FEMA’s NFIP Reinsurance Program has successfully enlisted private reinsurance and capital and strengthened the NFIP’s ability to pay policyholder claims after catastrophic floods and helps to protect taxpayers against NFIP losses following an extreme flooding event.”
Other aspects of the bills would require the use of replacement cost value in determining the premium rates for flood insurance coverage under the NFIP, ensuring homeowners pay their fair share and do not subsidize America’s wealthier coastal homeowners.
Another bill would enable commercial properties to opt-out of the NFIP mandatory purchase requirement, allowing businesses to more easily purchase private flood coverage.
Nat Wienecke, Senior Vice President, Federal Government Relations at American Property Casualty Insurance Association (APCIA), also commented on the proposed reforms.
“APCIA strongly supports the Taxpayer Exposure Mitigation Act and legislation requiring the use of replacement cost value in determining premium rates for flood insurance coverage under the National Flood Insurance Act,” Wienecke said. “Representative Luetkemeyer has led the way to provide taxpayer protection and allow those impacted by flooding to recover more quickly. We urge Congress to enact these two bills.”
Shannon McGahn, Chief Advocacy Officer, National Association of Realtors, further stated: “Since 2005, the NFIP has borrowed tens of billions of dollars to weather a series of catastrophic floods. Strengthening FEMA’s authority to purchase reinsurance will help transfer risk away from the taxpayer to the private sector. It’s a positive step forward and should be considered as part of a comprehensive restructuring of the program to be sustainable over the long term.”
