Florida's insurance market has long been a lively topic of discussion among legislators and policymakers. Citizens Property Insurance Corp. has struggled to stay viable and to revert to its intended role as property insurer of last resort. At the same time, Congress has been casting about, trying to figure out what to do about the National Flood Insurance Program.
In a recently published study, the Wharton Risk Management and Decision Processes Center looked at claims data from 2011 and came up with more than a total of U.S. and worldwide natural disaster insured losses. As shocking as the total was -- $350 billion -- the researchers expanded their inquiry to include the roles played by NFIP and private insurers in covering flood and hurricane damage.
If NFIP would stop just footing the bill and start to help flood-prone areas reduce the risk of property damage, the researchers say, private insurers would reenter the market. That can't happen, though, until Congress agrees to significant reforms for the program.
The researchers suggest that NFIP include regulations directed at minimizing the risk of flood damage. For example, NFIP could require that new construction in a flood-prone area be elevated. Less exposure could translate into a market more welcoming to private insurers. Similarly, regulators need to overhaul the floodplain maps completely. The new maps would identify areas of lower risk where, once again, private insurers could dare to tread.
The overall objective is to restore NFIP to its intended role as a disaster relief program. But, as with Citizens, lawmakers must agree that reform is possible before reform can actually happen.
Source: Risk & Insurance, "Federal Flood Insurance Program Gets Extension," Jon Campisi, Jan. 24, 2012