Insurance industry calls for NFIP extension, Risk Rating 2.0 delay
If the NFIP’s current authorization expires on Sept. 30, real estate owners, renters, and businesses could face devastating consequences.
With the National Flood Insurance Program (NFIP) set to expire within a matter of days, the insurance industry is rallying together to urge lawmakers to extend the program to ensure millions of Americans don’t experience a lapse in coverage.
The NFIP is due to expire at the end of the fiscal year on Sept. 30. Currently, the NFIP Extension Act of 2021 is under consideration in the U.S. Senate and would extend the program to Dec. 3, 2021.
The National Association of Mutual Insurance Companies (NAMIC), the Council of Insurance Agents and Brokers, the Independent Insurance Agents and Brokers of America (Big “I”), the Reinsurance Association of America, the Wholesale & Specialty Insurance Association (WSIA) and the American Property Casualty Insurance Association (APCIA) were among 18 insurance and real estate organizations that sent a letter to congressional leaders asking for reauthorization before Sept. 30.
“Although there is widespread agreement that a long-term reauthorization of a reformed NFIP is needed, allowing the program to lapse would be devastating to the policyholders across the nation who are still being impacted by COVID-19 and are facing an increasing number of severe flooding events,” the groups wrote in the letter. “Therefore, in the absence of any agreement to reform the program, we are calling on you to extend the program before Sept. 30 in order to provide some continuity and certainty to the millions of policyholders who rely on a functioning NFIP.”
In a separate memo, the Coalition for Sustainable Flood Insurance (CSFI) stressed the importance of extending the NFIP in a bullish homebuying market, especially in the wake of Hurricane Ida and amidst an active hurricane season. Not doing so could put buyers, sellers and businesses at “significant risk,” said the national coalition of approximately 250 organizations across 35 states.
“Failure of Congress to act appropriately would have widespread consequences, including FEMA stopping the sale and renewal of policies for millions of properties in communities across the nation,” the CSFI said in its letter to chairpersons of the House Committee on Financial Services and Senate Committee on Banking, Housing and Urban Affairs.
FEMA’s Risk Rating 2.0 ‘not ready’
The scheduled launch of FEMA’s new model, Risk Rating (RR) 2.0, on Oct. 1 has some insurance groups voicing concern over the new methodology and calling for a delay in its rollout.
“RR 2.0 is not ready for its scheduled Oct. 1 implementation,” said Jon Gentile, PIA National vice president of government relations, in a release. “The prodigious efforts of agents, carriers and vendors were not enough to overcome the tremendous gaps in FEMA’s rollout process. PIA is not alone in reaching this conclusion; members of Congress on both sides of the aisle have also called for a delay.”
According to PIA, the new rating system has been plagued by delays and confusion in recent months, including the lack of adequate training for flood insurance agents.
The CSFI voiced similar worries in its letter to Congress, stating that “the recent delayed release of rates under RR 2.0, and lack of public education about the potential impact, more information must be shared with consumers before implementation to better comprehend anticipated costs.”
However, despite pleas from the industry, David Maurstad, the senior executive of the NFIP and deputy associate administrator for federal insurance and mitigation at FEMA, told E&E News on Sept. 22: “There is no delay in writing the new policies under Risk Rating 2.0… It’s unprecedented. Never before has the program decreased premiums because the way we did it before didn’t allow for that. Those folks have been overpaying for too long. [Risk Rating 2.0] corrects that inequity.”
Under the revised rating system, 3.8 million homeowners are expected to see their insurance costs increase, according to an April 2021 ValuePeguin study. The study also found that most policyholders in Hawaii, Texas, Mississippi, West Virginia, Florida and Louisiana are expected to see premiums increases.
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