Update on NFIP Reauthorization

Senate Bill
On Monday, July 17, the Senate Banking Committee released their first draft of an NFIP reauthorization and reform bill. The Senate bill focuses on a narrow set of reform measures, including these key points:

• Reauthorizes the NFIP for six years
• Addresses repetitive loss properties with “appropriate sanctions”
• Increases ICC coverage from $30K to $60K with additional premium/fees
• Requires flood history to be disclosed for properties offered for sale or lease
• Calls for credits for multifamily structures that use alternative mitigation
• Continues funding the mapping program with added technology improvements required
• Incorporates replacement cost into the premium calculation
• Allows for risk transfer to the private market (reinsurance, bonds, etc.)
• Requires study on adding business interruption coverage

House Bills
The House Financial Services Committee passed seven bills to reform and reauthorize the NFIP. Key provisions include:

• A five-year program reauthorization
• Gradual decrease in WYO compensation to 27.9% of chargeable premium—down from 30.9%
• Administrative reforms to address issues from the aftermath of Super Storm Sandy
• Clarification that flood insurance policies written by private carriers satisfy the mandatory purchase requirement and allow continuous coverage rules to apply to private flood policies
• Repeal of the mandatory flood insurance coverage requirement for commercial and multifamily properties located in flood hazard areas

The Financial Services Committee staff has been working with industry stakeholders and consumer advocates to address their concerns. Though not likely, the House may vote on a final package the week of July 24.

Timing for full House consideration is less clear. The seven bills approved by the House Financial Services Committee will be combined into one comprehensive flood insurance reauthorization and reform legislative package. As noted above, the House may vote on their consolidated bill as early as the week of July 24. If House leadership determines that more time is needed to garner support, the full House vote may take place after their August recess. Because the Senate proposal is fundamentally different from the one proposed in the House, a House-Senate conference is expected to meet later this year to reconcile the two bills.

EXPECTED OUTCOME
Congressional consideration of a flood insurance reauthorization continues to be a moving target.  With a limited amount of time for resolution of House and Senate differences prior to the program’s September 30 expiration, a short-term extension of the NFIP becomes more likely. Members of Congress and their staffs have repeatedly assured Assurant government relations and other industry advocates that no lapse in the NFIP will occur.