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Administration reiterates support of actuarially sound NFIP rates

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Administration reiterates support of actuarially sound NFIP rates

The Obama administration has reiterated its support of a “phased transition” to actuarially sound flood insurance rates under the National Flood Insurance Program.

In a Monday statement of administration policy, the Office of Management and Budget said the Biggert-Waters Flood Insurance Reform Act requires the NFIP to set premiums for properties that reflect “true flood risk” to put the federal program, which is $24 billion in debt, on a sounder financial footing.

However, a measure before the Senate, the Homeowners Flood Insurance Affordability Act of 2014 and the National Association of Registered Agents and Brokers Reform Act of 2014 — S. 1926 — would delay implementation of entirely risk-based NFIP rates for certain properties. The omnibus budget bill passed earlier this month already delayed implementation of the new rates for about a year.

In its statement of policy, the administration said delaying premium rate reform “would further erode the financial position” of the NFIP and could reduce the government's ability to pay future claims.

“The administration recognizes that many policyholders may be challenged financially by the new rates and remains committed to working with the Congress to develop approaches that ensure economically distressed policyholders are not unduly burdened while maintaining the financial stability of the NFIP,” OMB said in the statement.

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The OMB also said it supports the policy goals of NARAB, which is designed to ease interstate licensing of insurance agents and brokers.

But the administration is concerned about a section of the bill that would set a process to conduct criminal history checks of people applying to become members of NARAB because the process is inconsistent with that used by the FBI to conduct such background checks.

The administration also expressed concern about a section that reserves eight of 13 positions on the NARAB board of directors for state insurance commissioners, which the White House said “appears to significantly constrict the pool” of people from which the president could chose nominees and “appears to impermissibly limit the scope of the president's appointment power.”

The administration recommended that the requirement be amended to expand the size of the pool of potential appointees.