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Member, Beacon International Group, Ltd.
WASHINGTON—The National Flood Insurance Program should be partially or entirely privatized, the heads of two reinsurance groups have told a government-sponsored forum on the NFIP.
The NFIP is not an insurance program the way it currently operates, but should be one, Frank Nutter, president of the Reinsurance Assn. of America, and Bradley Kading, president of the Assn. of Bermuda Insurers & Reinsurers, said in a statement presented Thursday at the Federal Emergency Management Agency’s public forum on NFIP reform.
Protecting taxpayers should be a guiding principle of the NFIP, the reinsurer groups said.
“One of the ways to achieve that is to privatize the NFIP in whole or in part,” Messrs. Nutter and Kading said in the statement. “In this regard, the private reinsurers and capital markets have the capacity and interest in underwriting flood insurance risk.”
Under certain circumstances, “the private (re)insurance sector could assume the flood risk over time,” which would eliminate or reduce the government’s role in providing coverage. “An essential element of achieving that goal is that premiums for any continuing NFIP should be set at true risk rates based on sound underwriting including credible mapping, taking into consideration potential catastrophic loss,” the RAA and ABIR leaders said.
In recent years, the NFIP has been extended repeatedly on a short-term basis because House and Senate leaders could not agree on whether the program should be required to offer windstorm as well as flood coverage.
However, the two chambers did agree in September to extend the program through next September without a windstorm component.