For Immediate Release: May 25, 2017
WASHINGTON, D.C.— Congress could save the National Flood Insurance Program (NFIP) billions of taxpayer dollars and improve its long-term financial strength by allowing more private sector insurers to enter the flood insurance marketplace, according to a study released today by the Reinsurance Association of America (RAA). The NFIP is currently $25 billion in debt and set to expire on September 30.
RAA’s analysis comes after the House Financial Services Committee released a series of proposals today to reform the NFIP. Congress also previously released draft legislation that would impose arbitrary restrictions on private market competition, preventing consumers from purchasing flood insurance outside of the NFIP.
“With the NFIP up for reauthorization, lawmakers should make it easier for homeowners and businesses to purchase a flood policy from private insurers who are eager to offer flood policies for properties across the risk spectrum,” said Frank Nutter, president of RAA. “Increased competition from the private sector would not only reduce the NFIP’s size and debt, but would ensure that the federal program remains sustainable for years to come.”
RAA’s findings are based on a comparative analysis between the NFIP and Florida Citizens Property Insurance Corporation, a similar government-subsidized insurer that went from the brink of financial ruin to strong financial footing by relying on private insurers to reduce taxpayer exposure to significant risk, while gradually increasing rates and investing in reinsurance.
According to the analysis, if the NFIP took actions similar to Citizens, it could reduce taxpayer exposure by 31 percent and would decrease the additional Treasury financing required to pay losses on floods that have a 1 percent chance of occurring by 91 percent over the next four years.
“Reducing the NFIP’s exposure to catastrophic events will strengthen the program financially while better protecting lives, property and taxpayer dollars,” said Dennis Burke, vice president of state relations for RAA. “The evidence is clear that private sector competition can help save the debt-ridden NFIP, so we urge lawmakers to reform the NFIP so that it supports consumer choice in the flood insurance marketplace and lessens America’s dependence on the broken federal program.”
To increase competition in the flood insurance marketplace, RAA previously called on Congress to pass the Flood Insurance Market Parity and Modernization Act introduced by Reps. Dennis Ross (R-FL) and Karen Castor (D-FL), and Sens. Dean Heller (R-NV) and Jon Tester (D-MT). This bipartisan legislation would help open the flood insurance marketplace to private insurers by easing regulations and allowing private insurance to fulfill mandatory purchase requirements.