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Flood insurance reprieve in sight for Florida homeowners

The U.S. House of Representatives passed a bill renewing and revising the National Flood Insurance Program this week. If passed by the Senate and signed by the president, the program would be authorized for five years, starting October 1 of this year. With the property insurance market in Florida in disarray, the prospect of flood coverage should ease some anxiety.

Congress renewed NFIP last September for one year to give lawmakers time to rework aspects of the program. Under the purview of the Federal Emergency Management Administration, NFIP has been plagued by deficits and administrative issues for years.

Among the important reforms are the following:

  • Phasing in risk-based premiums using improved flood mapping to develop rates
  • Phasing out subsidies for certain properties -- for example, high risk properties that have had repeat claims
  • Capping premium increases at 20 percent (up from 10 percent)
  • Allowing FEMA to purchase reinsurance from private companies instead of using public funds
  • Adding coverages to NFIP plans, such as business interruption coverage
  • Allowing private insurers to act as third-party administrators for NFIP policies

Insurance industry associations supported the bipartisan bill, saying the approach would lead to better coverage for consumers and a more financially sound program overall. They agreed with the bill's sponsor that the program is "too important to let lapse and too in debt [about $18 billion in the red] to continue without reform."

According to FEMA, there were about 5.6 million NFIP policyholders as of September 30, 2010 (most recent data available). Florida had the highest concentration of NFIP policies. More than 2.1 million policyholders -- almost 40 percent -- lived in Florida. Coming in a distant second, Texas had just over 675,000 policyholders, not even a third as many as Florida.

Source: Insurance Journal, "House Approves Flood Insurance Program Renewal, Reforms," 07/13/2011

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