10 Features of Revised NFIP

July 23, 2012

New legislation extends the National Flood Insurance Program until Sept. 30, 2017 and introduces various reforms. The reforms were put in place with one main goal in mind: to bring more financial stability to the program. Here are 10 of key provisions of the new program:

1. Redefines wind versus water: Allows for the creation of a collaborative NOAA and FEMA data share and engineering formula development to more accurately assess the cause of water damage in hurricane situations.

2. Requires a debt repayment action plan: The NFIP administrator is now required to outline a debt repayment plan for the $18 billion in Katrina-related debt.

3. Requires action on business interruption/additional living expense coverage: Charges the General Accountability Office with studying how the NFIP can address these excluded areas of loss.

4. Introduces a reinsurance option: The plan allows for FEMA to enter the reinsurance market, thus transferring a portion of the risk to the private sector.

5. Prohibits subsidized rates extension: Applies to policies that lapsed due to policy holder choice. Now these subsidized properties will be charges at a rate that equals the rates for the area in which the policy is located. Most notably, subsidies for repetitive-loss properties will disappear.

6. Sets higher premium caps: Now set at 20 percent, 10 percent over last year’s cap.

7. Raises the minimum deductible: The new program increases residential minimum deductibles to $2,000, $1,000 higher than last year.

8. Introduces coverage for multifamily dwellings: Previously excluded from coverage.

9. Establishes a technical map advisory council: Creates a committee to put into place a map modernization process.

10. Allows for private insurance in lending situations: Provides language that allows lenders to accept private flood insurance on a mortgage application.

From This Issue

Insurance Journal West July 23, 2012
July 23, 2012
Insurance Journal West Magazine

Excess, Surplus & Specialty Markets Directory Vol. II

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