NFIP overhaul needs to include new risk maps, increased coverage and higher rates

The US National Flood Insurance Program (NFIP) is in need of a significant overhaul which should include an expanded coverage, updated flood maps and higher rates, according to experts speaking to Intelligent Insurer.

The US Congress has extended the deadline to renew or repeal the NFIP to December 8, 2017.

In recent years, technological improvements have made it easier to manage and predict risks, which is likely to make the flood insurance market more attractive to the private sector. But flood maps used in the NFIP are deemed out of date and need to be improved.

Accurate information should allow property owners and property buyers to clarify what risks they face while helping local and state governments to better address flooding, said Pete Dailey, vice president global flood models of data provider RMS.
“Many homeowners are either unaware of their flood risk or lack flood coverage if their home lies outside the highest-risk flood zones,” he adds.

Premiums for the NFIP are highly subsidised and may have to be adjusted in order to better reflect the risk. Annual premiums add up to about $3.5 billion a year, but programme costs run to $5 billion, according to some estimates—even before accounting for catastrophic losses like those from Hurricanes Harvey and Irma.

The NFIP programme has already accumulated more than $24 billion in debt.

“Increasing the number of NFIP policyholders would generate more revenue into the programme and increase compliance within Special Flood Hazard Areas (SFHAs),” Dailey said.

“Proper risk management requires policies to be appropriately priced based on the actual flood risk and incentives to be provided to homeowners for mitigation efforts. This will lead to more effective risk transfer and allow FEMA to pay claims while managing its debt.”

This news story is just a snapshot of a longer feature published on Intelligent Insurer. If you want to find out more about what needs to change in the NFIP programme according to RMS and about the changes the president of the Reinsurance Association of America Frank Nutter suggests, please click here.

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