NAIC Drafts Changes for NFIP, Encourages Long-Term Reauthorization

The National Association of Insurance Commissioners (NAIC) has released its recommendations for changes to the National Flood Insurance Program (NFIP) when it goes up before Congress for reauthorization next year.

The current NFIP is due to expire on Sept. 30, 2017, and critics of the program, including many state insurance departments, have been vocal of the fact that changes must be made to in order for the NFIP to remain viable. FEMA said in 2015 it has plans for “sweeping reform” of the program, which is currently more than $23 billion in debt. More than 5.1 million consumers and businesses around the country utilize the program.

NAIC, which is made of up of state insurance regulators nationwide, recommended three objectives to consider in the NFIP debate: support long- term reauthorization; encourage greater growth in the private market; and encourage mitigation planning, legislation and support to reduce losses.

“Congress will have to tackle the tension between risk based pricing practices and affordable rates,” NAIC Property & Casualty Committee wrote in its draft recommendation to the Government Relations Leadership Council. “As Congress wrestles how to address these challenges, state insurance regulators stand ready to assist.”

NAIC urged Congress to consider its recommendations as part of a comprehensive approach to address the nation’s flood risk. The changes include:

The group plans to discuss the suggested principles at is August 28 meeting in San Diego.

The Property Casualty Insurers Association (PCI) applauded NAIC for its recommendations.

“The recommendations encourage greater growth in the private flood insurance market as a complement to the NFIP to help provide consumers with more choices. Additionally, they encourage support for mitigation planning, including legislative efforts such as the Disaster Savings Accounts Act (H.R. 2230) to allow individuals to set aside funds in a tax-preferred savings account for disaster mitigation and recovery expenses to help reduce losses,” said Don Griffin, vice president, personal lines for PCI.

“Developing a strong bipartisan consensus for stable long-term reform in advance of the program’s September 2017 expiration is necessary to avoid lapses and short-term extensions in order to protect families and businesses that depend on flood insurance,” Griffith added.