WASHINGTON (December 16, 2009) The National Association of Mutual Insurance Companies called on members of Congress to use the latest short term extension to complete reforms to the National Flood Insurance Program.
A two month extension for the program was included in defense spending legislation passed by the House today. It is expected to be passed by the Senate and signed by President Obama. The extension keeps the program in place as is and fails to address the NFIP’s current debt and pricing problems.
“While it’s important that the National Flood Insurance Program remain in place for the next two months, Congress needs to stop kicking the can down the road and start working on meaningful reforms,” said Jimi Grande, senior vice president of federal and political affairs. “The problems facing the NFIP aren’t going away. The program is financially unsustainable and failing to address that only makes the problem worse for homeowners, insurers and the American taxpayer.”
NAMIC has called for a long term extension of the NFIP with specific reforms to ensure its financial stability including a phasing out of premium subsidies for non-residential and secondary residences. The programs should also mandate the modernization of flood plain and elevation mapping, and provide incentives for mitigation programs. Also, NAMIC has called for stronger penalties for financial institutions that fail to ensure that borrowers obtain coverage for properties.
“These common sense reforms, if enacted, would create a strong foundation for the NFIP, ensuring its ability to provide protection for homeowners and businesses while minimizing the potential need for a taxpayer-funded bailout,” Grande said.
Despite the program’s already precarious financial standing, some have proposed expanding the NFIP to include windstorm coverage in its policies. NAMIC opposes this as a reckless expansion that would threaten the private homeowners insurance market and add to the financial risks already being borne the NFIP.
“The NFIP was established because the private market was unable to effectively assess flood risk and price coverage. The same cannot be said for windstorm coverage, where there is an active and competitive market,” Grande said. “Adding windstorm coverage to the NFIP would distort that market, and likely put much of the risk in the hands of the federal government.”
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