Flood insurance reform: Another year of storms and stalling

We were relatively fortunate in 2018. Hurricanes were a bit more merciful on the U.S. than in 2017—but that’s not to say we didn’t experience yet another arduous year. Hurricane Florence swept away entire towns in the Carolinas, while Hurricane Michael completely decimated coastal communities off the Florida Panhandle.

With combined insured and uninsured losses of about $25 billion, according to CoreLogic, these storms were nothing short of devastating. Yet they were not enough to spur lawmakers into action. Once again this year, Congress failed to do anything aimed at solving the nation’s flood insurance dilemma.

They had opportunities on Nov. 30, and again on Dec. 6. On those dates, they passed their 8th and 9th temporary extensions of the NFIP since September 2017—and none of these temporary extensions included reforms.

While the NFIP remains tied up in Congressional stalemates, the ultimate answer to our collective dilemma, the private flood insurance market, continues to thrive. More homeowners are buying non-NFIP flood insurance that provides broader coverage at often lower prices than the NFIP offers and word is spreading that options exist beyond the NFIP.

However, as we look ahead to 2019, if Congress fails to stop the improper regulation of the private flood insurance market by federal lending regulators, private flood insurers will continue to be disadvantaged in the fight to provide flood insurance buyers with choices and state-based insurer accountability.

Federal lending regulators are not authorized by Congress to, nor are they qualified to, issue a rule that will turn them into insurance regulators. They simply do not have any place regulating consumers’ or lenders’ rights to buy private flood insurance policies. State insurance regulators are already doing a great job there.

Related: Repeated payments for flooded homes: How much is too much?

A look back

Considering both this year’s Atlantic and Pacific storms, the 2018 season was one of the most active years ever, according to USA Today. Between this storm season and the ruthless 2017 hurricane season, it seems almost inconceivable that a tiny minority of senators would successfully insist that the NFIP remain unchanged.

Surely they understand that to do nothing is in reality a decision to needlessly spend billions more in taxpayer dollars to fund NFIP losses. But, as of press time, there is no hint of progress, just another temporary reauthorization through December 21.

When all taxpayer bailouts of the NFIP are counted, and unpaid claims from Florence are added in, the NFIP will have cost taxpayers a staggering $45 billion in the past 15 years alone. What about policyholders?

It is now over six years since Super Storm Sandy and the NFIP monopoly still has not settled all of those claims. There are still claims that have not been settled extending from Hurricane Katrina which took place over thirteen years ago. No state insurance regulator would allow what the NFIP puts policyholders through in federal court to adjudicate a disputed claim.

Looking back at the year as a whole, in 2018, Congress never really dealt with the crux of the problem–the need for unimpeded private market participation. In 2017, the House of Representatives passed the Flood Insurance Market Parity and Modernization Act introduced by Reps. Dennis Ross (R-Fla.) and Kathy Castor (D-Fla.) to correct the effects of language in the Biggert-Waters Flood Insurance Reform Act of 2012.

The correction would have placed private flood insurance on a level playing field with the NFIP for the first time but four or five senators blocked the measure. In 2018, the measure came up again but was tied to reauthorization of the Federal Aviation Administration only to have the Senate strip the language from the bill before passing the FAA funding measure. Since then, only a series of temporary extensions have been passed.

Related: Well, the National Flood Insurance Program still hasn’t lapsed

A look ahead

So, what’s next? In terms of action from Congress, it could be another barren year. Before the looming Dec. 21 st deadline, which coincides with the appropriations bill controlling government funding, we expect Congress to pass another six-month extension of the NFIP.

During that time, it is likely that NFIP reform bills will be considered. It remains very uncertain that our senators and representatives will take any action. The big question will be whether the flood issue will be considered by Congress as a bipartisan issue or used as a political football, as has been the case in the Senate.

Fortunately, better informed federal lending regulators might be reconsidering the proposed rule that has hung like a storm cloud over private flood insurance for the last five years. A more even-handed rule could come as early as the first quarter of 2019.

Though the severity of storms and flooding in 2019 is an unknown, flood insurance reauthorization and reform is certain to remain on the to-do lists of lawmakers and regulators. Congress must pass more than temporary reauthorizations for the NFIP to solve this problem.

But then again, if federal lending regulators were to issue a reasonable rule, the private market may just operate hand in glove with the good folks who actually run the NFIP to solve the issue without any help from the legislative branch of government.

One thing is certain — flood insurance buyers and taxpayers deserve better treatment, more choices and better coverage.

Related: FEMA begins payments on flood claims for homes in central Texas

Craig Poulton is chief executive officer of Salt Lake City-based Poulton Associates, LLC, which administers the country’s largest private flood insurance program, the Natural Catastrophe Insurance Program at CATcoverage.com.