National Flood Insurance Program to Expire – Again
March 26, 2010 – Yet another halt in the federal National Flood Insurance Program might occur this weekend as federal lawmakers drag their heels on enacting permanent changes to the national program insuring more than 5.5 million homes in the United States.
Unless federal lawmakers approve at least another temporary extension of the flood insurance program, the program will expire at 11:59 p.m. on March 28. Lawmakers in the U.S. House of Representatives want to extend the program another month to provide time to enact permanent changes, but members of the U.S. Senate earlier voted to extend it until the end of 2010. Instead of taking up the already-approved Senate bill, the House of Representatives instead approved their own measure extending the program only another month and referred it to the Senate for consideration.
The Senate now must concur with the House timeline to prevent the National Flood Insurance Program from expiring for the second time this year. The flood insurance program expired briefly on Feb. 28 when the Senate became bogged down in debate over funding for other federal programs. The current extension was approved on March 2, but the extended debate on national health care legislation kept the Senate preoccupied and as of today has been unable to concur with the House of Representatives on extending the program another month.
Even a temporary suspension in the National Health Insurance Program is problematic for many homeowners. When the federal program expired briefly earlier this month, it delayed the closing of the sale of homes located in federally designated flood areas. Homes in federally designated flood areas must be protected with flood insurance. No new flood insurance policies can be issued while the federal program is expired, but current policies remain in force until their expiration, and policyholders can file claims arising from flood insurance damage.
The National Flood Insurance Program initially expired a year ago, but instead of enacting permanent changes, Congressional leaders several times have chosen to simply temporarily extend the program in its current form while debating national health care reform that would not take effect for several years. The National Flood Insurance Program provides flood insurance protection for homes located in designated flood plains across the country.
Extending the National Flood Insurance Program until May 31, 2009, originally was part of the latest “stimulus” effort but was nixed as part of Senate Democrats’ cost-cutting efforts. Federal officials have extended the debt-riddled program’s deadline several times in lieu of enacting permanent changes. Lawmakers are divided on how to sufficiently fund the program and don’t agree on proposals to add coverage for wind damages to the National Flood Insurance Program.
The National Flood Insurance Program’s expiration would leave more than 5.5 million U.S. homes in flood-prone areas without flood insurance protection. The National Flood Insurance Program covers homes located in high-risk flood areas across the United States and is the insurer-of-last-resort in areas where private insurance companies deem it too risky to provide typical flood insurance protection.
The flood insurance program’s expiration date already was extended several times over the past year to give members of the U.S. House of Representatives and Senate time to work out differences in the program’s direction. House members are demanding the program be expanded to provide insurance protection against wind damage.
The National Flood Insurance Program originally was to expire on March 6 of last year, but federal lawmakers have delayed enacting permanent changes to the National flood Insurance Program while debating highly controversial national health care legislation.
Many Americans Susceptible to Flood Damage
Standard homeowners insurance and renters insurance policies don’t cover floods, yet nearly a third of Americans surveyed mistakenly thought their insurance protected them.
The Insurance Information Institute recently commissioned a study asking 1,004 individuals if their homeowners insurance or renters insurance covers damage from flooding during a hurricane. Almost a third initially said their homeowners insurance included protection against flooding during hurricanes only to find out later they were not covered.
While the question pertained to hurricanes, flooding is more widespread than many homeowners realize. More than 90 percent of natural disasters in the United States include flooding, according to the Federal Emergency Management Agency. Even after wildfires, water erosion and flooding becomes a concern due to the lack of vegetation.
Flood insurance is available through the federal government’s National Flood Insurance Program, which has nearly 100 companies available to underwrite flood insurance policies. A standard flood insurance policy through the federal program offers up to $250,000 coverage for a home’s structure and another $100,000 for personal belongings. Additional coverage amounts are available.
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Federal Government Extends Indebted National Flood Insurance Program
The federal government recently approved extending the financially troubled National Flood Insurance Program through early March 2009, a move supported by the American Insurance Association as federal officials work to improve the troubled program designed to provide affordable flood insurance protection for America’s homeowners.
“We would have preferred passage of a long-term reauthorization bill that also contained much needed reforms of the Nation Flood Insurance Program. While this extension does not fix the program’s problems, it does help those living in flood-prone areas by making sure coverage continues to be available,” said Marc Racicot, president of the American Insurance Association. “A short term extension to keep the federal flood program in place is the most prudent action for Congress to take.”
Although the flood insurance program has been extended through winter, much work is needed to continue the financially troubled federal program currently some $17 billion in debt. Some insurance officials advocate increasing the federal program’s scope to insure against wind damages while others caution against expanding its coverage.
“We are ready to engage in the debate on National Flood Insurance Program reforms when it occurs early next year, and we remain committed to opposing efforts to add wind coverage to the program,” Racicot said. “Dramatically expanding it to include wind coverage creates the potential for huge deficits that all taxpayers would ultimately be responsible for – on top of the current National Flood Insurance Program debt of about $17 billion.”
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North Carolina Officials Examining Coastal Homeowners Insurance Risk
Nearly a tenth of North Carolina’s insured properties are located along hurricane exposed coastal waterways, and the state’s legislators are considering ways to keep homeowners insurance and other property protections affordable without unduly penalizing residents living out of harm’s way.
North Carolina has $133 billion in insured coastal properties exposed to potential hurricane storm damage. The $133 billion in insured properties represents 9 percent of the North Carolina’s total homeowners insurance and other property insurance in force, according to AIR Worldwide. An ad-hoc legislative committee is examining the state’s underwriting association, the North Carolina Beach Plan, to ensure is has the financial resources to back its homeowners insurance and other insurance policies in the event of a catastrophic storm.
“The North Carolina Beach Plan is one major hurricane away from financial disaster,” said Raymond G. Farmer of the American Insurance Association. “The legislative study committee is the first step in what we hope will be a thorough examination of North Carolina’s hurricane risk and the financial implications for both the private and residual markets.”
The North Carolina Insurance Underwriting Association, also known as the Beach Plan, has experienced rapid growth in recent years in terms of insured exposure and the numbers of policies throughout the 18 county coastal area it covers. The program’s sudden growth raises concerns over whether the Beach Plan’s premiums are enough to protect policyholders against a major storm.
“After a major storm there would likely be significant assessments on private insurers, and the only option for recouping those assessments is through the ratemaking process,” said Farmer. “Depending on the size of the storm, that scenario could put the health of the private market at risk, not to mention that non-coastal residents will be subsidizing the coast.”
Once the Beach Plan’s finances are exhausted on claims, private insurance companies writing homeowners insurance and other property coverages in North Carolina likely would have to pay the difference, resulting in higher premiums for property owners not exposed to hurricane risk. The state agency already insures more than half of North Carolina’s coastal properties exposed to hurricane risk, totaling nearly $70 billion on more than 153,000 policies in force.
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North Carolina Gov Signs Beach Plan Revisions
Aug. 27, 2009 – North Carolina Governor Bev Perdue today signed into law revisions to the state’s property insurance plan its 18 coastal counties.
The measure, House Bill 1305, is designed to rescue North Carolina’s coastal insurance plan and revamps the state-funded North Carolina Insurance Underwriting Association, popularly called the Beach Plan. The Beach Plan provides property insurance protection in the state’s 18 hurricane-prone coastal counties.
The measure requires the Beach Plan to charge 5 percent more than private insurers for property owners purchasing only wind and hail insurance and 15 percent more than private insurers for full property insurance coverage that includes wind and hail coverage. The higher amounts are designed to encourage property owners to purchase coverage through private companies. The House bill initially sought a 10 percent higher premium for wind and hail coverage and a 20 percent higher premium for full property insurance coverage.
At least one insurance industry official said the measure as approved will help stabilize the state’s insurance market.
“Elected officials have realized how out of kilter the current Beach Plan is and have taken steps to begin to rectify the situation,” said Liz Reynolds of the National Association of Mutual Insurance Companies.
The reforms partly were spurred by a recent actuarial study indicating the Beach Plan faced a grave risk of severe financial impairment if a catastrophic storm stuck the state’s Atlantic coastal counties. The Property Casualty Insurers Association of America commissioned the study that reported the Beach Plan has only about $1.5 billion to cover losses that could exceed $7 billion on policies written through the state-backed program.
Nearly a tenth of North Carolina’s insured properties are located along hurricane exposed coastal waterways, and the state’s legislators want to keep homeowners insurance and other property protections affordable without penalizing residents living out of harm’s way.
North Carolina has $133 billion in insured coastal properties exposed to potential storm damage. The $133 billion in insured properties represent 9 percent of North Carolina’s total homeowners insurance and other property insurance in force, according to AIR Worldwide.
The Beach Plan experienced rapid growth in recent years in terms of insured exposure and the number of policies sold throughout the 18 county coastal area it covers. The public entity insures more than half of North Carolina’s coastal properties exposed to hurricanes and other risks, totaling nearly $70 billion on more than 153,000 policies in force.
New Law Requires Some Texas Homeowners to Buy More Flood Insurance
Sept. 1, 2009 – Effective today, many Texas residents located in the state’s Gulf Coast area who build new homes or modify existing ones and want wind insurance coverage through the state’s insurer of last resort now are required to purchase flood insurance equal to 90 percent of their homes’ value or up to the limit offered by the National Flood Insurance Program.
New Texas Department of Insurance regulations require homeowners seeking wind insurance coverage through the Texas Windstorm Insurance Association to purchase the additional flood insurance coverage if they don’t already have qualifying amounts, according to officials for the Independent Insurance Agents of Texas. The National Flood Insurance Program provides a maximum coverage amount of $250,000.
The new insurance regulations were developed when the Texas Legislature earlier this year approved them for homes and other properties that are “constructed, altered, remodeled or enlarged” after today’s date. The new regulations only apply to voluntary construction projects and do not apply to homes being repaired, including those damaged or destroyed last year by Hurricanes Dolly and Ike and Dolly. The regulations also do not apply to homes insured through private insurers.
Texas homeowners residing within the state’s coastal “V Zone” and wanting wind insurance coverage through the state windstorm insurance association must abide by the new regulation. Structures built in “V Zones” are highly susceptible to a dangerous combination of wind and water damage due to their typically close proximity to water and high susceptibility to flooding and storm surges from tropical storms.
Although the regulatory changes took effect today, officials for the Texas Windstorm Insurance Association have yet to develop monitoring procedures to help enforce the new law.
The Texas Legislature also enacted changes designed to encourage residents to purchase insurance coverage through private insurers instead of relying on the public entity. To get coverage through the Texas Windstorm Insurance Association, homeowners will have to prove an insurance company doing business in the coastal areas refused to provide or renew property insurance coverage before becoming eligible to purchase insurance through the public entity.
Another change in state law taking effect today requires the Texas Windstorm Insurance Association to retain premiums amounting to 180 days of insurance coverage if policyholders force cancellation by failing to pay premiums or otherwise cancel their insurance coverage. If the premium isn’t paid, policyholders won’t be eligible for future program participation until fully paying their debts. A coverage lapse also could trigger a requirement that homeowners obtain a building code compliance certificate to obtain insurance coverage once again.