In an effort to renew the National Flood Insurance Program (NFIP) and restore its fiscal soundness, the U.S. Senate passed a continuing resolution (CR) package on September 27, 2008 that will ensure funding through March 6, 2009.
Congress initially established the vital program with the passage of the National Flood Insurance Act of 1968. The NFIP enables property owners located in participating communities to purchase insurance as protection against flood losses in exchange for state and community floodplain management regulations that reduce future flood damages.
The overall goal is for much-needed long-term program reform. Nonetheless, Independent Insurance Agents & Brokers of America (the Big "I") and Property Casualty Insurers Association of America (PCI) lauded the short-term extension, which is considered by both organizations to be a noteworthy development for insurance consumers. Had the program been allowed to expire at month's end, millions of consumers and small businesses would have been left lacking protection from flood-related damage just as hurricane season gains momentum.
"While we would have preferred that Congress pass a long-term extension with much-needed reforms, it was vital to ensure that the NFIP would not lapse on Sept. 30," said David A. Sampson, president and CEO of the Property Casualty Insurers Association of America (PCI). "Expiration of the program would have serious consequences, not just for policyholders but also for the nation's economy at large. Every homeowner with a federally backed mortgage in a floodplain must have flood insurance in order to finance a home purchase. If the program were to expire, real estate transactions in flood-prone areas would come to a halt. Given the economic challenges our nation already faces, we could not take the chance of allowing this vital program to expire."
After The House of Representatives passed the extension earlier last week, the Senate soon followed. The temporary fix will ostensibly allow Congress to continue negotiating differences between the House and Senate versions of the Flood Insurance Reform and Modernization (FIRM) Act of 2007. Both versions of the legislation would extend the program for five years. The Big "I" says it strongly supports a long-term reauthorization that encompasses these reforms, especially the increase in maximum coverage limits and the addition of optional business interruption insurance.
Gov. Marc Racicot, president, American Insurance Association (AIA), expressed a sentiment similar to that of the Big "I," saying that AIA will continue its commitment to effectuating reform.
"We are ready to engage in the debate on NFIP reforms when it occurs early next year, and we remain committed to opposing efforts to add wind coverage to the NFIP," he said. "Dramatically expanding the NFIP to include wind coverage creates the potential for huge deficits that all taxpayers would ultimately be responsible for, on top of the current NFIP debt of about $17 billion. We continue to believe the solution rests in improving, not displacing, the private sector's ability to serve homeowners and businesses in the path of potential storms."
The extension does not include the addition of windstorm coverage to the NFIP. The resolution will be presented for President Bush's signature.
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