NFIP Formally Extended Until March 6, 2009

Using industry trade groups as his primary sources, Arthur Postal reports passage of the extension for the National Underwriter. Our readers will remember current AIA Prez Marc Racicot as former Montana GOP Governor and George W Bushie 2004 campaign manager.

The Senate approved legislation Saturday that includes a provision extending the authorization for the current National Flood Insurance Program until March 6, 2009…….

The House passed the same bill Thursday.

Some insurance industry trade groups voiced grudging support for the extension, although they said they had hoped Congress would have completed work on legislation that would have extended the program as well as reformed it by this time.

But an official of the American Insurance Association made clear that his members continue to oppose adding wind coverage to the program, a provision contained in proposed House legislation.

The Independent Insurance Agents and Brokers of America noted that both unpassed House and Senate versions of the legislation would extend the program for 5 years “and make significant and needed reforms to help put the program on sound financial footing.”

Robert Rusbuldt, president and CEO of the IIABA, said the trade group “strongly supports a long-term reauthorization that contains these reforms, especially the increase in maximum coverage limits and the addition of optional business interruption insurance.”

Meanwhile, it appears there will be no further action on several other bills of interest to the insurance industry and they will have to be reintroduced next year.

These include legislation that would have created an Office of Insurance Information within the Treasury Department; a bill that would modernize and simplify regulation of the surplus lines insurance industry; and another that would recreate the National Association of Registered Agents and Brokers.

Under the latter bill, a NARAB commission would coordinate with the states to establish a central clearinghouse for license issuance and renewal and collection of regulatory information on producer activities. Under the bill, individual state licenses would continue to be issued.

Action on these bills was delayed because Congress put aside all other work in order to focus on controversial legislation that will provide the Treasury Department with up to $700 billion to buy mortgage assets that are becoming increasingly harder for financial institutions to value as housing prices deteriorate.

The House is expected to vote on the bill today and the Senate Thursday, after a two-day recess for the Jewish New Year.

The provision extending the NFIP was included in legislation which appropriates $630 billion to continue running the government until that time.

But it reopens the possibility for future legislation with provisions opposed by the insurance and reinsurance industry by a Congress expected to include more Democrats.

These include addition of wind damage coverage to the program—a provision strongly opposed in the Senate by a 74-19 vote in May—as well as the possibility of other proposals supported by House Democrats.

Another potential item is a bill that would allow states to pool catastrophic risks, then transfer them to the private market through the sale of catastrophe bonds or purchase of reinsurance. The plan would be backed by the federal government.

It is opposed by some segments of the insurance industry and supported by others, and opposed by the reinsurance industry.

David A. Sampson, president and CEO of the Property Casualty Insurers Association of America, said that “while we would have preferred that Congress pass a long-term extension with much-needed reforms, it was vital to ensure that the NFIP would not lapse on Sept. 30th.”

The reason PCI supported the extension, he said, was that “expiration of the program would have serious consequences, not just for policyholders but also for the nation’s economy at large.”

Gov. Marc Racicot, president of the American Insurance Association, said, “While this extension does not fix the NFIP’s problems, it does help those living in flood-prone areas by making sure coverage continues to be available.”

He called the short-term extension “the most prudent action for Congress to take.”

But, Mr. Racicot said, “We are ready to engage in the debate on NFIP reforms when it occurs early next year, and we remain committed to opposing efforts to add wind coverage to the NFIP.”