You are here:HomeNews CenterPIA Press Releases2006PIA Lauds Increase in NFIP Borrowing Authority, Committee Approval of Reform Bill

PIA Lauds Increase in NFIP Borrowing Authority, Committee Approval of Reform Bill

WASHINGTON, March 17, 2006 - The National Association of Professional Insurance Agents today applauded approval by the Senate of an increase to $20.8...
March 17, 2006

WASHINGTON, March 17, 2006  - The National Association of Professional Insurance Agents today applauded approval by the Senate of an increase to $20.8 billion in the borrowing authority of the National Flood Insurance Program (NFIP), as well as House committee passage of a bill to reform the program.

On Thursday March 16, the Senate approved by voice vote legislation allowing NFIP to borrow up to $20.8 billion from the Treasury, up from the current ceiling of $18.5 billion. The measure, approved by the House last month, now goes to the president for his signature. Earlier in the day, the House Financial Services Committee passed the Flood Insurance Reform and Modernization Act of 2006 (H.R. 4973), which enacts reforms to the program and increases the borrowing authority further, to $25 billion.

"The stopgap increase in borrowing authority approved by the Senate along with the comprehensive reform package passed by the House Financial Services Committee gets things moving in the right direction," said PIA Senior Vice President Patricia A. Borowski. "PIA urges President Bush to sign the increase, and then the full House and the Senate should proceed to address reforms."

"We are pleased to see that finally, the issue of funding to pay for current policyholder claims has been separated from the consideration of reforms - at least, it appears to have been separated," Borowski said. "It would be better if this funding was not being parceled out incrementally in dribs and drabs, but at least there is a realization that not paying valid claims to flood victims insured under NFIP is not an option."

According to a statement issued by the House Financial Services Committee, should the NFIP run out of money needed to pay the estimated 225,000 claims related to Hurricanes Katrina and Rita, homeowners whose claims are not paid could initiate legal action against FEMA. National Flood Insurance Program claims liabilities arising from Hurricanes Katrina and Rita are estimated at over $24 billion dollars, far surpassing the total claims paid in the entire history of the NFIP.

Many of the reform provisions in H.R. 4973 mirror proposals submitted by PIA on October 20, 2005 to the House Financial Services Committee and the Senate Banking Committee. These include an increase in building property insurance limit maximums and minimum training and education requirements for insurance agents. In addition, the Flood Insurance Producers National Committee (FIPNC), of which PIA is a founding member and serves as rotating chair, has also taken a leadership role in advancing NFIP reform proposals.

Among its provisions, H.R. 4973 would increase maximum coverage limits for flood insurance policies to deal with inflation and the higher cost of housing; extend a pilot program for mitigation of severe repetitive loss properties to 2011; set up a program for the review, update, and maintenance of national flood insurance program rate maps; and require FEMA to issue regulations clarifying the applicability of "replacement cost coverage" under the program.

"Moving a common sense reform agenda for the NFIP is one step in addressing the problems the program has been experiencing," Borowski said. "Another step is assuring that needed increases in borrowing authority to pay claims are not held hostage to spur passage of reforms."

In the 1960's, PIA led successful efforts to create a federal insurance program providing needed flood coverage for homes and businesses. The National Flood Insurance Program (NFIP) was created as part of the National Flood Insurance Act of 1968 to enable the federal government to help cover the cost of flood damages.  Prior to that time, insurance companies generally did not offer coverage for flood disasters because of the high risks involved.

Founded in 1931, PIA is a national trade association that represents member insurance agents and their employees who sell and service all kinds of insurance, but specialize in coverage of automobiles, homes and businesses. PIA is celebrating its 75th anniversary in 2006.

Filed under: