H.R. 5569, a temporary reauthorization of the National Flood Insurance Program (NFIP), will land on President Barack Obama’s desk in the coming days.
Nearly a month after the NFIP lapsed, the U.S. Senate followed the House’s lead and late last night voted unanimously to approve the program until Sept. 30. The reauthorization will be retroactive to the date it was discontinued, June 1. The NFIP is designed to provide 5.5 million Americans with protection from floods associated with hurricanes, tropical storms, heavy rains and other conditions that impact the U.S. Standard personal lines’ property and casualty insurance does not cover flooding and must be purchased through the NFIP.
The Independent Insurance Agents & Brokers of America (the Big “I”) was among the first industry groups to comment, stating that while the resumption of the program is welcome, the spring lapse -- the third time this year it has been forced to halt operations-- has caused difficulties for homeowners and small businesses.“It is alarming that the NFIP was allowed to remain expired for so long, causing so much confusion and potentially leaving desperate homeowners and small businesses unprotected for almost a month,” says Robert Rusbuldt, Big “I” president and CEO. “While the Big ‘I’ is appreciative of Congress extending the program on a temporary basis, we are also greatly concerned that these short expiration periods and patchwork of temporary extensions will negatively impact the market.”
The Property Casualty Insurers Association of America (PCI) also expressed appreciation for last night's Congressional action, and called on elected leaders to consider a long-term flood solution as homeowners brace for the 2010 Atlantic Hurricane Season. "We are pleased that Congress reauthorized the flood insurance program," said David Sampson, president and CEO of PCI. "But this three-month extension threatens to leave communities vulnerable again in September, at the height of hurricane season."
Earlier this week, Tropical Storm Alex strengthened to become the first hurricane of the 2010 Atlantic Hurricane Season and is the first June hurricane since 1995. Yet, pointed out PCI, home and business owners were unable to purchase flood insurance to protect themselves from the potential devastating rains and flash floods until Congress reauthorized the expired program.
Congress failed to extend the NFIP before leaving for the Memorial Day recess. Since June 1, the program was in what the Federal Emergency Management Agency (FEMA) calls a “hiatus period,” meaning that no flood insurance policies could be issued or renewed. In addition, existing policyholders could not increase their coverage. This was the third lapse in flood insurance coverage this year.
Once President Obama signs the bill into law, the NFIP should resume its normal course, and since the extension is retroactive, any new policy applications or renewals that were signed and submitted during the hiatus will be effective from the date of application (or in the case of waiting periods, the waiting period will start from the date of application), points out the Big I.
Congress has traditionally extended the program for five year periods. The industry continues to urge Congress to finalize a long term extension of the program.
In fact, PCI has gone on record supporting H.R. 5114, the “Flood Insurance Reform and Priorities Act of 2010”, sponsored by Representative Maxine Waters (D-Ca.) as a long-term solution for the NFIP. The legislation takes a “responsible approach” to making the flood program more financially stable, providing the program with an important five year extension and limiting additional federal exposure to natural disasters, notes PCI.
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