A group of the industry’s heavy hitters, including the Mortgage Bankers Association (MBA) and the American Bankers Association (ABA), is calling on Congress to enact a long-term solution to lapses in flood insurance coverage.
During the recent government shutdown — the longest in U.S. history — the National Flood Insurance Program (NFIP) lacked authority to issue new flood insurance policies. And it wasn’t the first time that has happened. Almost every time the program comes up for renewal, lawmakers kick the can down the road by passing temporary authorizations that often run out in months.
Indeed, earlier this month, Congress reauthorized the flood insurance program through Jan. 30.
During the government shutdown, the National Association of Realtors (NAR) estimated that up to 40,000 home sales were at risk of closing without active flood insurance coverage in Federal Emergency Management Agency (FEMA)-designated high-risk areas. Furthermore, additional sales may have occurred in high-risk areas not yet identified by FEMA, leaving many buyers unaware of potential flood risks.
“The unavailability of the NFIP for any period of time is highly disruptive to the mortgage and commercial lending processes, to the availability of financial and technical assistance to homeowners of repetitive loss properties, and to NFIP policyholders attempting to renew their expiring policies,” the group, which identifies itself as the Coalition of Flood Industry Trade Organizations, said in a letter to key lawmakers.
Only about 4% of all homeowners have flood insurance, and that’s largely due to the federal mandatory purchase requirement, the group said.
“The NFIP and this mandate were created because most home owners would not buy flood insurance voluntarily, and the private flood insurers could not sustain a pool made up mostly of the highest-risk properties,” the 13-member Coalition wrote.
It urged Congress to include authorization of the NFIP beyond the current fiscal year in future legislative proposals. More importantly, it said, it’s time to end the cycle of short-term extensions and program lapses “that fuel instability in real estate markets and communities dependent on reliable flood coverage and mitigation support.”
The group pointed out that bipartisan efforts have already proposed several long-term reauthorization packages. They include: Modernization of FEMA’s flood maps to cover the entire country and account for all types of flooding, including rainfall-based events. Currently, 40% of flood claims occur outside designated high-risk areas.
Expansion of mitigation assistance to help home owners and communities reduce risk, protect lives, and lower insurance costs.
According to the National Institute of Building Sciences, every $1 invested in mitigation yields $13 in avoided losses.
Cultivation of a public-private partnership between the NFIP and private flood insurers to expand coverage options and improve affordability, particularly outside high-risk zones.
The Coalition urged the Senate Banking and House Financial Services Committees to “find common ground and pass a long-term reauthorization and reform package.” And it called on all lawmakers with an interest in flood insurance to build on existing consensus and deliver solutions to the problem.
It also said its members “stand ready” to support a broad, bipartisan measure that restores certainty to stakeholders across the country.
Besides the MBA and ABA, other members of the Coalition include: the American Land Title Association (ALTA), Association of State Floodplain Managers, Flood Insurance Producers National Committee, Greater New Orleans Inc., Coalition for Sustainable Flood Insurance, Independent Insurance Agents and Brokers of America, Insurance Institute for Business and Home Safety, National Association of Flood and Stormwater Management Agencies, National Association of Mutual Insurance Companies, National Association of Professional Insurance Agents, National Flood Association, SmarterSafer Coalition, and the Counsel of Insurance Agents and Brokers.
The letter was addressed to the Speaker of the House Rep. Mike Johnson, Rep. Hakeem Jeffries, and Sens. John Thune and Chuck Schumer.
