The countdown is on for NFIP Reauthorization, the renewal of the National Flood Insurance Program set to expire September 30, 2017. Both the U.S. House of Representatives and U.S. Senate must pass legislation to continue the federal program. In the coming months, Congress will consider changes, improvements, short-term or long-term renewal. Given the challenges of a program consistently in debt, the unpredictable nature of severe weather events, and a new presidential administration, many Members of Congress have suggested a move towards the private insurance market as the sole source for flood insurance. Fasten your seat belts, for the process promises to be a bumpy ride.
Here’s your NFIP Reauthorization Watch Briefing: a video synopsis (courtesy of the Wall Street Journal), background, and a few hints at the debate sure to occur.
The NFIP, administered by the Federal Emergency Management Agency in the Department of Homeland Security, was created in 1968 by Congress to provide residential and commercial insurance coverage for flood damage, to improve floodplain management and to develop maps of flood hazard zones. The NFIP makes flood insurance available to homeowners and businesses whose communities agree to adopt and enforce regulations to mitigate flood damage.
By adopting NFIP codes and standards, communities formally agree to regulate the use and development of flood-prone lands or SFHAs (Special Flood Hazard Areas). In return, the program provides flood insurance coverage for any property located in flood zones. The NFIP uses flood insurance rate maps to determine SFHA-located properties. Underwriters and agents use these same maps to determine premiums; lenders use them to determine insurance-purchasing requirements.
NFIP regulations require that all federally regulated lending institutions perform flood zone determinations on properties before granting loans. If a property is within a SFHA, the lender must require that the borrower maintains flood insurance on all buildings within the SFHA for the loan period.
In theory, the laws are fair and just. The premiums generated by SFHA insurance requirements help pay for the disaster relief costs that flood zones so often necessitate. In reality, the flood zone determination procedures used to implement the laws are seriously flawed.
Despite a nearly $2 billion map modernization project initiated in 2008, many FEMA flood maps still do not account for changes due to new development, levee improvements, repairs or decertification and other elements that alter the flow of floodwaters within the floodplain. The maps paint broad strokes of flood risk and do not reflect whether a structure in a SFHA is designed to mitigate flooding or constructed in a flood-safe manner. Further, the maps do not reflect drainage patterns or the status, performance, or maintenance of flood control systems.
The Biggert-Waters Flood Insurance Reform Act of 2012 (BW-12) reauthorized the NFIP through September 30, 2017, and implemented reforms to make the program more financially and structurally sound.
In 2014, the Homeowner Flood Insurance Affordability Act was enacted, which repeals and modifies certain controversial BW-12 provisions and makes additional changes to the program.
According to an article in Forbes Magazine, as a result of BW-12:
The rate increases also left room to imagine something that hasn’t been feasible in decades – the sale of policies by primary insurers in the private flood insurance market.
You can read the entire article: The Private Flood Insurance Market Is Stirring After More Than 50 Years Of Dormancy, today.
U.S. taxpayers, particularly flood insurance consumers, must monitor the twists and turns of the NFIP Reauthorization process and remain proactive about flood risk. If you own, manage, or represent property subject to flood insurance requirements,
- Stay informed of flood insurance rate map changes in your area.
- Conduct a flood risk evaluation, a proactive strategy to mitigate flood risk, protect the real estate investment and verify whether the structure is built to minimize the risk of flooding.
Contact AmeriFlood Solutions for more information including a complimentary flood risk evaluation performed by an expert team of flood risk professionals.