FEMA moves to bypass congress with private insurance

FEMA moves to bypass congress with private insurance

FEMA moves to bypass congress with private insurance

To offset potential future losses and reduce the amount of risk carried by the program, the Federal Emergency Management Agency (FEMA) has revealed that it is making several amendments to the way the National Flood Insurance Program (NFIP) works.

The NFIP is roughly $30 billion in debt and continues to pay out claims related to the destructive hurricane season last year. FEMA has taken on almost $1.5 billion in reinsurance from over two dozen companies to help pay for some of the claims.

On top of taking out reinsurance coverage, FEMA is introducing changes to the way the NFIP operates – changes that have already drawn mixed reactions from insurers and legislators.

The first change FEMA revealed is that it is rescinding its non-compete rule for the NFIP. This means insurers that sell NFIP-backed policies through the NFIP’s “Write Your Own” program can now sell their own flood insurance coverage. The other change is that the cut the NFIP pays “Write Your Own” insurer participants will be slightly decreased; this tweak could possibly lead to lower premiums for policyholders or allow more money to go to the NFIP to pay more claims.

FEMA’s NFIP overhaul circumvents Congress as legislators continue to debate how to best rescue the national flood program from financial deficit.

NFIP chief executive Roy Wright told POLITICO that opening the flood insurance market to private competition would benefit taxpayers.

“We need more people selling these products,” he commented.

The insurance industry praised FEMA’s decision to allow “Write Your Own” companies to sell their own policies and add reinsurance coverage, but some industry representatives are worried that reducing the compensation for insurers that sell NFIP policies means less incentives for them and fewer sales made.

“The flooding events in 2016 and 2017 clearly show that too few property owners purchase flood coverage,” American Insurance Association vice-president for federal affairs Tom Santos told The Advocate. “Thus, we ought to be looking for ways to expand consumer options by preserving and expanding the private sector’s ability to offer flood insurance coverage -- both NFIP coverage and private coverage.”


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  • 4/9/2018 10:31:22 AM
    What if each insurance company had to pay a fee to them each year or something like that? I think that would be easier than figuring out their own programs??
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  • Robert 4/9/2018 10:34:09 AM
    Why not have those "Write your own" Insurance companies, currently placing Flood business with FEMA, have a simple Property endorsement allowing the Homeowners policy to cover Flood? One policy for everything. Insurer's may balk but the consumer would benefit by having lower costs.
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  • Eagle Insurance/Consulting 4/9/2018 10:44:39 AM
    If the Flood Insurance is taken away from the Government it then can be placed in the free market and with so many insurance companies out there, it should reduce the rates people are paying now. Especially if it is opened up as an endorsement to Homeowners Policies and to Commercial Property accounts as an easy add on so the companies can collect more Premiums and spread the risk even more. At present the spreading of risk is only with those that are expected to have an occurrence. If you spread it over the others that should not encounter an occurrence or have a really reduced exposure this will lower the premiums for the consumer.
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