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National Flood Insurance Program needs long-term reauthorization

The National Flood Insurance Program (NFIP), which was established in 1968 making the program 50 years old, has been extended 17 times just between 2008 and 2012.

“The program lapsed for more than a month four times in 2010 and 2011,” said Cumbest Realty owner Mark Cumbest, who is the Governor’s Gulf Coast Business Leader Appointment to the Mississippi Windstorm Underwriters Association Board of Directors (the Wind Pool Board).

This year the NFIP was renewed on the day it was scheduled to lapse.

“On July 31 the President signed legislation which extends the program only through November 30,” Cumbest said. “This fluctuation of a solid flood insurance program obviously creates instability in the real estate market. It is unsettling for prospects wanting to buy or sell real estate in flood areas. The National Association of Realtors estimates that a lapse in flood insurance coverage could impact 40,000 home closings a month nationally.”

South Mississippi has a tremendous number of privately-owned properties located in flood zones. In addition to individuals buying flood insurance to protect their real estate investments, flood insurance is required by lenders in order to protect their collateral, Cumbest said.

“We need a long-term reauthorization of the NFIP in order to stabilize the real estate market,” Cumbest said. “This is controversial because taxpayers who do not own property in flood prone areas are reluctant to subsidize the cost of people building again and again in high-risk flood areas. We have to have competition. I see that as the future for the NFIP to be actuarially sound. I recently read a Reuters’ article which said that one of the world’s largest re-insurers and a Florida Insurance company have joined forces to offer Florida homeowners water damage insurance. These policies include flood coverage in their homeowners’ policies. If this concept catches on and competition among the providers grow, this could very easily be one of the solutions to the flood insurance dilemma.”

Mike Chaney, Mississippi Commissioner of Insurance and State Fire Marshall, also advocates long-term reform of the NFIP that includes more competition.

“It’s a situation where the government needs to step out of the way and let free enterprise solve the flood problem, with federal backup,” Chaney said. “Certainly, there could be areas where people would cherry-pick and private flood insurance may not cover someone that’s in a real vulnerable area. That’s why the NFIP existed in the first place, to cover those clearly in harm’s way.”

Sen. Roger Wicker of Mississippi says while the extension through November was not ideal, a lapse in the program would have been completely reckless, leaving millions of Americans uncertain about their flood insurance protections.

“A flood insurance policy is crucial for Americans in coastal or low-lying areas,” Wicker said in a recent weekly column. “As we saw with last year’s devastating hurricane season, major storms can swiftly bring rains and flooding not seen in hundreds of years.  With six major hurricanes, last year’s season was the most expensive in our nation’s history, exceeding $200 billion in damages.”

It is estimated that more than 20,000 communities along the nation’s coastlines, rivers, and inland waterways participate, including 329 communities in Mississippi. Many of these communities and their residents are major economic powerhouses.

“According to the National Oceanic and Atmospheric Administration (NOAA), our coastal counties are home to 56 million jobs and generate $8 trillion in goods and services,” Wicker said. “Another economic engine, the Mississippi River, produces $400 billion in revenues. Cultivating a more suitable NFIP over the long-term would ensure that these communities can continue to thrive without being ruined by the next disaster.”

  Wicker said while the past 41 reauthorizations of the NFIP have rarely included reform, reforming the NFIP is key to keeping its solvent.

“I have introduced two legislative proposals to help make NFIP work better,” Wicker said. “The first would seek to improve the accuracy of property loss assessments after severe storms like Hurricane Katrina. After Katrina, homeowners were often caught in the middle of disagreements over whether the damage to their property was caused by wind or water. My “COASTAL Implementation Act” would improve NOAA’s ability to understand the dynamics of a storm, helping to pinpoint the strength of wind and water at affected sites and reducing NFIP’s costs.”

Wicker’s second proposal deals with gathering better data, specifically when it comes to the creation of comprehensive and accurate flood maps. 

“These maps are essential to NFIP, which uses them to identify areas with the greatest flood hazards,” he said. “I call this bill the MEMA Act, which is short for Municipality Empowerment Mapping Achievement. It would update NFIP’s rate maps for the entire United States and make them more accessible to the public.

“Try as we might, we cannot prevent floods. We can work to guard against them, but we cannot eliminate them. They are the most frequent natural disaster, and we should do what we can to mitigate the costs and damage. Ensuring Americans can still rely on NFIP for disaster protection is key to this preparation.”

Wicker has also introduced legislation that would deliver relief for small business owners and nonprofits by allowing surcharges to be used for mitigation (“Small Business Surcharge Relief Act,” S. 2091); and to provide continuing education for insurance agents to ensure that accurate information about flood policies is being presented to consumers (“Flood Insurance Continuing Education and Training Act,” S. 2092).


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