NAMIC: NFIP Rates Must Reflect Risk; Senate Should Not Delay Increases

By Arthur D. Postal, PropertyCasualty360.com

October 17, 2013

The National Association of Mutual Insurance Companies is asking the Senate to resist calls to delay or rescind scheduled flood insurance rate increases, arguing that the rates must adequately reflect the risks.

The NAMIC letter was sent to the Senate legislative leadership Wednesday apparently out of concern that some members of the Senate would try to insert such language in legislation yesterday that raised the debt ceiling and ended the federal-government shutdown.

While the bill did include several provisions not directly related to the two critical issues, provisions touching on the flood insurance rate hikes, which are part of National Flood Insurance Program reforms passed in 2012, were not included.

However, altering the rate hikes has attracted strong support in the Senate. For example, 24 senators signed on to a letter last week asking Congress to delay the increases pending completion of affordability studies and appeals of new flood maps that are being used to determine individual increases or decreases levied by the NFIP.

And Sen. Charles Schumer, D-N.Y., a member of the Senate Democratic leadership, has told his constituents that he would seek changes to the mandated rate hikes after the debt/shutdown crises were resolved.

In NAMIC's letter, signed by Jimi Grande, NAMIC senior vice president, federal and political affairs, the association says, "The NFIP must charge rates that reflect the true cost of providing flood-insurance coverage, and the government should not continue to mask the risks of living in a flood-prone area by delaying these much-needed reforms."

Grande says in the letter that prior to the passage of the reform legislation, the Biggert-Waters Act of 2012, the NFIP's "unsustainable rates all but ensured the program would remain in debt to the Treasury and would be incapable of meeting its obligations to policyholders after a major flood."

Grande adds that NAMIC recognizes the need in some cases for assistance, which could be provided through direct assistance rather than by weakening the NFIP through suppressed flood-insurance rates. He also emphasized the need to address natural catastrophes like flooding in a proactive manner, highlighting the need for better mitigation practices by both the public and private sectors.

"NAMIC continues to support providing assistance on a means-tested basis for those who truly cannot afford the increased rates, and we are also actively engaged in efforts to reduce the threat of flooding by promoting and incentivizing pre-disaster mitigation," Grande says in the letter.

"However, we remain in full support of reforms to the NFIP made by the Biggert-Waters Act and oppose any efforts to delay or rollback pieces of the legislation," Grande said.

Currently, roll-back efforts are on three tracks: there is the strong support in the Senate for legislation delaying the rate hikes; there is pending legislation passed by the full House and the Senate Appropriations Committee that would delay at least for one year some of the rate hikes; and there is a lawsuit filed in Federal District Court in Gulfport, Miss., that seeks an injunction barring the rate hikes pending completion of certain studies.

The suit was filed by the Mississippi insurance commissioner in early October. A hearing on the issue is scheduled for Oct. 28. Currently, Florida and Louisiana have indicated that they would file friend of the court briefs supporting the lawsuit.