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OPINION: Don't delay NFIP action


A PAIR OF DEVELOPMENTS should serve as a spur to a real debate over national natural catastrophe policy in the new year. Unfortunately, “should” doesn't mean “will.”

2011 has entered the history books as the costliest year ever in terms of insured catastrophe losses, according to Munich Reinsurance Co., with insured losses reaching about $105 billion globally—almost $36 billion in the United States alone.

In addition, on Dec. 23, President Barack Obama signed into a law a measure that extends the National Flood Insurance Program through May. But his signature came only hours before the program was set to lapse. Had it lapsed, as has happened several times in recent years, the lack of flood insurance would have further weakened an already wobbly real estate market.

These two developments underscore the need for a comprehensive approach to catastrophe policy. Part of that approach would involve a long-term extension of the NFIP. But the NFIP is deficit-ridden, hardly a recommendation for business as usual in a time of fiscal uncertainty.

The Federal Emergency Management Agency, which oversees the program, has indicated that it is at least willing to look at serious reform of the program. That includes a greater role for the private market, particularly the reinsurance market, in providing flood insurance. Given that the private insurance market provides flood insurance for commercial accounts, looking at a wider role for the private sector isn't as revolutionary as it sounds. It's an idea that deserves careful consideration.

Munich Re's tally of 2011's cat losses also should serve as spur to action to promote more effective mitigation efforts in cat-prone areas. Politically difficult as it might be, the federal government eventually will have to set some serious preconditions that must be met to qualify for post-disaster relief.

We know that an election year isn't the best time to debate such weighty matters. But debate has to start sometime, and now is as good a time as any. Serious catastrophe policy reform will take years, and the sooner Congress begins that process, the better.