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The U.S. House of Representatives adopted a bill to reauthorize the National Flood Insurance Program for five years and implement several reforms, including provisions designed to spur additional private insurer involvement in covering flood risk, after a contentious debate over the measure that drew bipartisan opposition.
While many bill provisions would make much-needed reforms to the debt-ridden program, including one that would clarify that mortgage lenders could accept private flood insurance in lieu of federal coverage to satisfy the mandatory purchase requirement, other provisions could work against expansion of private insurer coverage, including reduced reimbursements for private insurers administering flood policies on the government’s behalf, according to experts.
The House voted 237-189 on Tuesday to pass H.R. 2874, the 21st Century Flood Reform Act, with 222 Republicans and 15 Democrats voting in favor and 15 Republicans and 174 Democrats voting against the bill. Much of the contentious discourse on the House floor revolved around the bill’s efforts to deal with repetitively flooded properties, which account for a significant portion of the NFIP’s multibillion-dollar losses, and accusations from several Northeast legislators that the bill was biased against their constituents.
Rep. Dennis Ross, R-Florida, urged his colleagues to support the bill on the House floor on Tuesday.
“By putting policyholders on a slow path to sound premium rates, we are stepping toward a future where the threats of major floods are confronted before they are realized,” he said. “I think we all agree that more needs to be done to mitigate flood risk and incentivize investments in its resiliency. We can take the first steps by eliminating the false security that inoculates our society to the dangers of flooding. Let’s remove the blindfold we’ve placed over the public’s eyes. Let’s gradually walk back the subsidies that conceal a homeowner’s risk.”
“I agree we should do something about repetitive loss properties … but not the draconian measures taken in this bill,” Rep. Michael Capuano, D- Massachusetts, said in opposing the bill.
A longer extension would have been preferable, but the Risk & Insurance Management Society Inc. will take the five years, said John Burkholder, risk and insurance director for Tampa International Airport, and vice chair of the RIMS external affairs committee.
“Obviously, the most important thing is we have something in place because businesses and individuals rely upon consistency and knowing the rules of the road and what the plan is,” he said.
The bill would also eliminate the noncompete clause, meaning elimination of the regulatory restriction that currently prevents insurers participating in the NFIP’s Write Your Own program from selling both NFIP and private flood insurance policies.
“They are removing the noncompete, which is a good thing for adding private insurers,” Mr. Burkholder said.
The Property Casualty Insurers Association of America thanked the House for voting to reauthorize the program, reducing unnecessary burdens and costs, including adoption of the market parity provision, commonly referred to this year as the Ross-Castor bill after sponsors Rep. Ross and Kathy Castor, D-Florida.
“That’s a major hurdle,” Craig Poulton, CEO of Salt Lake City-based Poulton Associates, the underwriting manager and administrator of the Natural Catastrophe Insurance Program, a private flood insurer, said of the Ross-Cantor language. “If they did nothing else than finally get rid of this lending regulator issue … it would be worth the Senate passing. Overall, I thought they came up with a pretty good bill. If I was doing it, I probably would have done things differently, but that probably just means it’s a good bill because I have my biases as well.”
But PCI expressed concern about a provision to reduce the reimbursement rate for Write Your Own insurers to 27.9% from 30.9%, which the association suggested could lead to further declines in the number of WYO insurers servicing the program. However, Mr. Poulton said reducing the compensation percentage for the WYO insurers was “probably warranted.”
The bill now goes to the Senate, but supporters fear senators will not take it up ahead of the Dec. 8 expiration, either due to time limitations related to the Thanksgiving holiday or political opposition against its potential expansion of the role of the private sector in covering flood risk.
“I love the fact that the House has passed this bill, and it is tremendous progress because the House has created a substantive, multifaceted step forward in this reauthorization,” Mr. Poulton said. “This has been vetted. It has been discussed. By and large, it is a pretty intelligent reauthorization and has addressed most of the crucial issues.”
But the bill is likely to stall in the Senate, he said. “My belief is that Congress will be forced to pass a short-term extension. I also believe because of the timing being Dec. 8 that it’s very possible we will see a gap between the expiration and the extension,” he added.
Mr. Burkholder said he is “very hopeful” that Congress will be able to pass the extension ahead of the deadline. “We don’t have a lot of time left,” he said.
“When this bill fails in the Senate, you’re going to find a lot of people on this side who continue to want to work with you to come up with a bill we can all embrace,” Mr. Capuano said.
President Donald Trump signed a $36.5 billion disaster relief bill that will forgive $16 billion in debt owed by the National Flood Insurance Program.