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House passes measure to extend NFIP

Five-year extension, private market study among key provisions

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House passes measure to extend NFIP

WASHINGTON—Insurance industry groups say they hope the U.S. Senate follows the House's lead and passes legislation to extend the National Flood Insurance Program through Sept. 30, 2016.

The program has been extended piecemeal and allowed to lapse several times in recent years as the House and Senate could not agree on what the NFIP should and should not cover. The result was repeated market disruptions as the program could not issue new policies.

But the House approved the bipartisan Flood Insurance Reform Act of 2011 on a 406-22 vote last week after defeating an amendment that would have killed the program next year. Insurer and business groups, including the Risk & Insurance Management Society Inc., had sent a letter to House leaders early in the week opposing the amendment.

Among other things, the reform bill, which enjoys the support of the Obama administration, would extend the program for five years beyond its current Sept. 30 sunset. It also would require studies of possibly giving the private insurance industry a greater role in flood insurance, and reducing subsidies for the program.

New York-based RIMS hailed the vote.

“We're pleased with the vote in the House and anticipate eventual passage in the Senate because this maintains an important risk financing tool for our members,” said John Phelps, RIMS board liaison to the external affairs committee.

“Although we believe certain improvements to the program can and should be made, elimination of the program was not in the best interests of commercial insureds who rely on flood coverage through the program,” said Mr. Phelps, who also is director-business risk solutions at Blue Cross and Blue Shield of Florida Inc. in Jacksonville.

Ron Hayes, risk manager for the Calcasieu parish school system in Lake Charles, La., said he was “absolutely thrilled” by the proposed five-year extension.

“Last year, we were fearful of the loss of the program that would impact threatened properties with the lack of protection” due to repeated lapses in the program, said Mr. Hayes, a former president of the Alexandria, Va.-based Public Risk Management Assn. When it appeared NFIP might exit the market or “die from lack of funding, we really had no recourse—there was no place to get coverage,” he said.

Insurers strongly support the latest NFIP legislation and want the Senate to follow suit quickly.

Most of the obstacles that hampered meaningful reform in the past are gone, said Jimi Grande, senior vp in the Washington office of the National Assn. of Mutual Insurance Cos.

“We have a better chance than we've ever had for meaningful reform in the Senate,” he said. Unlike a measure introduced in the previous Congress, this bill does not contain a provision that would require the program to include wind and flood cover, he said. Mr. Grande noted that the chief proponent of that expansion, former Rep. Gene Taylor, D-Miss., was defeated in his bid for re-election.

“We've had one of the biggest flood seasons we've ever had and natural disasters in general have been devastating this year,” said Mr. Grande. But “the Senate still doesn't have a great track record of action on this program.”

“The House has done its part to address this issue,” Mr. Grande said. “The ball is now in the Senate's court and the clock is ticking.”

In a statement, Ben McKay, senior vp of the Property Casualty Insurers Assn. of America's Washington office, noted that repeated NFIP lapses wrought havoc in the market.

“In 2010 alone, the NFIP lapsed four times and flood coverage could not be purchased or renewed for a total of 53 days,” said Mr. McKay. “Lapses in NFIP coverage have created uncertainty in the housing market and left homes and businesses even more vulnerable to devastating floods, while leaving taxpayers exposed to costly relief efforts.”

“The biggest significance of the vote is this is not kicking the can down the road, as they have done in the past. It's actually a five-year reauthorization, and it moves the program slowly towards and actuarially sound basis,” said Joel Kopperud, director-government affairs for the Council of Insurance Agents & Brokers in Washington.

“The House bill is a five-year extension and contains a number of reforms that will move the program toward a more financially sound position,” said Tom Santos, vp-federal affairs at the American Insurance Assn. in Washington. “It got 406 votes, so it's a good bipartisan product that will help ensure that the program remains for those 5.6 million policyholders who need for flood coverage.”

“The Senate Banking Committee has held two hearings and they're working to produce a bipartisan product,” Mr. Santos said. “I don't see any roadblocks in the committee, but I think everything in the Senate is held up on the debt ceiling negotiations, so they've got some scheduling and timing issues.”