NFIP expiration date looms; lapse risks disrupting US housing market

The National Flood Insurance Program (NFIP) will expire on March 23, 2018 for the third time this year if Congress fails to act and a lapse in the debt-ridden programme may disrupt the national housing market and leave countless homeowners in harm’s way if a severe storm strikes, stakeholder coalition SmarterSafer has warned.

On Feb. 9, 2018, US president Donald Trump signed legislation passed by both houses of Congress that extends the National Flood Insurance Program’s (NFIP’s) authorisation to March 23, 2018.

SmarterSafer, a coalition of taxpayer advocates, environmental groups, insurance interests, housing organisations and mitigation advocates has called on the Senate to “stop kicking the can down the road on fixing the NFIP by passing meaningful reforms to the programme similar to the 21st Century Flood Reform Act” before it expires on March 23.

The bill, which previously passed in the House of Representatives last fall, would reauthorize the programme for five years while making several reforms such as investing in mapping and mitigation, addressing affordability and providing consumer choice in the flood insurance marketplace. The coalition is also urging the Senate to include additional measures in their reauthorisation package that require property level data in mapping, nature-based community mitigation measures, continued movement toward risk-based rates and ways to convert affordability assistance into mitigation where cost-effective.

If the NFIP’s authorisation lapses, the Federal Emergency Management Agency (FEMA) would still have authority to ensure the payment of valid claims with available funds, the organisation claims on its website. However, FEMA would stop selling and renewing policies for millions of properties in communities across the nation. Nationwide, the National Association of Realtors estimates that a lapse might impact approximately 40,000 home sale closings per month.

The flood insurance programme’s debt soared to almost $25 billion since Hurricane Katrina devastated Louisiana in 2005, but Trump recently signed a bill forgiving $16 billion.

Nevertheless, losses are expected to soar as a result of 2017’s storms, pushing up the debt again.

In January 2018, FEMA increased the amount of reinsurance coverage protecting the NFIP by almost 40 percent.

Expanding on its inaugural $1 billion placement in January 2017 which was completely exhausted due to heavy catastrophe losses mainly associated with Hurricane Harvey, FEMA transferred $1.46 billion of the NFIP’s financial risk to the private reinsurance market for the 2018 period with 28 private reinsurance companies participating.

Join us at Intelligent Automation in Insurance - London 2018. Spring Special:  Book before March 31st and save £200. 

More of today's news

Negotiations on multi-year insurance contracts stall due to Brexit

Davies Group reorganises business, shakes up management

Brit appoints head of UK property from Marsh

Prudential downgraded by S&P on demerger plan

Assurant expands product offering to include commercial property

Don't miss our insurtech email newsletter - sign up today