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Legislation that would temporarily extend the National Flood Insurance Program (NFIP) until March 31, 2010, was introduced into Congress yesterday. House Financial Services Housing Subcommittee Chairwoman Maxine Waters, D-Calif., and Committee Chairman Barney Frank, D-Mass., introduced the extension bill, which will temporarily extend the NFIP, currently set to expire on Sept. 30, 2009.
If the NFIP were to expire, real-estate transactions in flood-prone areas would come to a halt. Additionally, many home buyers use federally backed mortgages to purchase property, and such mortgages are prohibited by law for homes in floodplains without flood insurance.
In addition, Waters and Frank announced their intention to draft a new bi-partisan measure to reform the NFIP. The updated legislation would incorporate important NFIP reforms previously approved by the House in 2007 and consider new studies and information not available when the Committee last reviewed the NFIP. Frank and Waters also plan to engage the Obama Administration and FEMA officials, and they invite recommendations for the reform legislation from all interested parties.
“The National Flood Insurance Program is set to expire in September—right in the middle of hurricane season,” Chairwoman Waters said. “Letting the program expire in the middle of hurricane season would have serious repercussions for areas prone to flooding. A six-month extension is prudent and necessary.”
Earlier this year, an extension was signed by President Obama just hours before the program was set to expire. Should the latest temporary extension pass, Congress will have time to continue work on long-term NFIP improvements.
“This extension is just a temporary fix, but it is a significant and welcome development for millions of homeowners and small businesses who count on the NFIP for protection in the event of flooding,” says Charles E. Symington Jr., Big “I” senior vice president for government affairs. “If the NFIP is allowed to expire, millions of consumers would be left vulnerable the next time a flood devastates a community.”
In the 110th Congress, the Flood Insurance Reform and Modernization (FIRM) Act of 2007 made progress in the House and Senate. The legislation would have extended the program for five years and made significant and needed reforms to help put the program on sound financial footing. The effort is expected to move forward during the 111th Congress.
Independent agents strongly support a long term NFIP reauthorization that contains significant reforms, especially the increase in maximum coverage limits and the addition of optional business interruption insurance.
“Unfortunately, recent years have provided ample examples of the destruction left behind by floods that highlight the urgency and importance of updating the NFIP,” says John Prible, Big “I” assistant vice president for federal government affairs. “The Big ‘I’ strongly believes that homeowners and businesses need both higher coverage limits and business interruption insurance in order to properly insure their property. ”
Property/casualty insurers also praised the introduction of an NFIP extension but noted they hope for continued reform to the current program.
“We also support Reps. Frank and Waters in their commitment to crafting new bi-partisan legislation that would implement much needed reforms to the NFIP,” said Leigh Ann Pusey, president and CEO of the American Insurance Association (AIA). “AIA looks forward to working with the House Financial Services Committee as it writes an updated bill that will improve the program and restore its financial stability.”
David A. Sampson, president and CEO of the Property Casualty Insurers Association of America (PCI), added, “We will continue to work with Congress to move as soon as practicable on a long-term extension, which is the necessary solution for renewing and reforming this vital program and restoring its fiscal soundness. But with all of the crucial financial and economic legislation currently before Congress, we understand that lawmakers simply can not give this issue the time it requires at this moment.”
Sources: IIABA, AIA, PCI