Despite the fact that the House has passed a bill providing for a five-year extension of the National Flood Insurance Program (NFIP), another stop-gap extension may occur. That’s the assessment of Rita Hollada, PIA National’s representative to the Flood Insurance Producers National Committee (FIPNC), and a former FIPNC chair. Hollada said she is hearing that if the program is reauthorized without lapsing again, it will probably be another short-term extension to December 31 to bide time until the next Congress can act on reforms to the program.

In an interview with the National Underwriter, Hollada said the flood program had been paying for itself prior to Hurricane Katrina, but the 2005 hurricane was “such a huge shock loss” that the program suffered far more losses than it could cover, and it was forced to borrow money from the Treasury. The program is now over $18 billion in debt and the NFIP, she said, feels that Katrina was an aberration, and that the program is well-suited to handle losses in a “normal year.” She added that the NFIP would like Congress to forgive the debt since it sees Katrina as an anomaly, but the House “is not amenable to forgiving the debt.” People in Congress, Hollada said, feel the program is broken and want to enact reforms. Meanwhile, she added, others in Congress are applying pressure to increase available coverages provided by the NFIP.

PIA supports the House-passed bill with the five-year NFIP extension and opposes adding wind coverage to the program as proposed by Rep. Gene Taylor (D-Miss.).

Agents: 5-Year NFIP Extension Unlikely Now (National Underwriter 8/18)

Agents Ready Clients For NFIP Lapse (National Underwriter 8/20)

Congress’ Failure Endangers Carrier NFIP Participation (National Underwriter 8/17/10)

August 24, 2010