90% of all natural disasters cause flooding according to the National Association of Insurance Commissioners. All 50 united states have been hit by flooding in the last 5 years alone, with Florida still one of the most at risk. Yet, critical insurance coverage may be at risk unless the National Flood Insurance Program (NFIP) is fixed and extended, fast.
Expiring Flood Protection
The current NFIP is set to expire on September 30th, 2017. This legal provision and program helps to aid homeowners, investors, lenders, and industry professionals with information and flood maps to accurately assess risk and ensure availability of coverage and affordable coverage.
If it lapses, homeowners and lenders could be at risk, and the market could stall without having access to essential services required to close real estate transactions. Unfortunately, the expiration of the NFIP comes right in the middle of the Atlantic Hurricane Season, when Floridians are most at risk of being hit with a major storm.
The poorly managed program is currently in debt to the tune of around $23B. We not only need an extension, but some vital changes to the operation as well.
Chief Underwriting Officer at Ironshore, Shawn Homand says that private insurance companies are interested in stepping in to provide coverage. However, there needs to be some balance if private insurers are to take over a larger percentage of this business. The NFIP has been criticized for failing to provide the best deals as it levies premiums based on the community, not the individual property. Private insurers who look at individual properties could ensure low-risk owners get better deals than higher risk owners. The danger is that flood insurance has so far been one of the least expensive types of insurance. With flood insurance requirements being expanded based on new and higher levels of risk, and owners still often needing far more expensive wind-storm (hurricane) insurance policies, any sizable leaps in premiums could hurt the housing market.
The New National Flood Insurance Program Reauthorization Bill
On June 13th, 2017, a group of senators introduced a draft bill that would reauthorize the NFIP for 6 more years. The Sustainable, Affordable, Fair and Efficient National Flood Insurance Program Reauthorization Act of 2017 (SAFE NFIP) would also tackle reforms to the program which is currently administered by FEMA. This would include addressing inaccuracy in flood maps, contractor profiteering, caps on premium hikes, and freezing interest on debt owed to the US Treasury.
It is vital that property owners and financiers are able to continue to find insurance coverage from flood threats. Reach out to your senate and congressional representatives, and see if there are ways to support efforts by your local Chamber of Commerce or Realtors association to ensure there is no expiration of the NFIP, and that sound reforms are being worked on.