By Sean P. Carr
Reaching agreement on a five-year reauthorization of the National Flood Insurance Program took several years. In the aftermath of Hurricane Sandy, some advocates of market-based reforms are saying there may be a need to make more changes, possibly even during the lame-duck congressional session that will follow the elections.
With flood damage expected to overflow the NFIP's borrowing authority limit of $20.7 billion, Congress will be called upon to add capacity. That may create an opportunity to push additional changes, such as language on residual risk, Steve Ellis, vice president of Taxpayers for Common Sense, said during a conference call with SmarterSafer.org, a coalition of groups advocating NFIP reforms.
A deal to keep areas near levees and dams in mandatory insurance coverage zones collapsed at the last minute at the end of June. Opposition by senators concerned about new insurance costs for their constituents, as well as a threatened amendment on abortion, nearly scuttled the bipartisan legislation.
The case should be made for stepping up the pace of market-based reforms, including the imposition of actuarially sound rates and mitigation efforts, said Eli Lehrer, president of the R Street Institute. The final legislation did not wipe out the NFIP's debt obligation to the U.S. Treasury — which then stood at approximately $18 billion, mostly as a result of Hurricane Katrina — as had been proposed.
"We cannot give NFIP an endless gravy train of money," Lehrer said.
The five-year reauthorization will phase out subsidies for some 355,000 residences, including secondary and vacation homes.
There is little appetite for returning to the NFIP debates, said Matt Gannon, assistant vice president of federal affairs for the National Association of Mutual Insurance Companies. There was too much balking over minor issues for even broadly popular provisions, such as residual risk, to get another chance right now, he told SNL.
"I don't see it happening, in terms of real reforms," Gannon said in an interview. "Opening it up to complain about it? Sure."
With residential flood insurance funneled through the NFIP, the federal government has responsibility for waterlogged homes. Allstate Corp. and The Hartford Financial Services Group Inc. were among large insurers that actively lobbied for market-based changes earlier this year.
Sandy's toll should bring new attention to the importance of strong building codes, particularly when it comes to rebuilding efforts, Gannon said. New Jersey and New York, the states hit hardest by Sandy, have comprehensive mandatory codes for new construction, but many states do not, he said.
A host of insurance companies are members of the BuildStrong Coalition, which advocates passage of H.R. 2069, the Safe Building Code Incentive Act. The bill would provide incentives for states to adopt and enforce modern standards. Gannon identified Allstate, Liberty Mutual Holding Co. Inc., State Farm Mutual Automobile Insurance Co. and Travelers Cos. Inc. as some of the more active companies in this campaign.
A dollar of mitigation equals a savings of four dollars in post-loss spending, advocates say. "Mitigation is the market way," Lehrer said.
Original Publication URL: http://www2.snl.com/Interactivex/article.aspx?CdId=A-16221370-13365
Discussion
Sign Up for Updates
