Down to wire on extension of flood insurance

Today, July 31, is the deadline to extend the National Flood Insurance Program, which insures millions of Americans and thousands of Rhode Islanders against the threat of floods, before it’s due to expire starting August 1.

If the program expires those already insured through NFIP will keep their coverage for the duration of their policy, but they will not be able to renew their policy or acquire new flood insurance through NFIP.

The House of Representatives acted to pass a four-month extension of NFIP on July 25, but as of press time the Senate had not voted to the same extension, with the program’s future now hanging in the balance.

NFIP is a federal program that supplies flood insurance to over 5 million homes nationwide, insuring more than $1 trillion in home value. In Rhode Island 13,592 policies are written, insuring over $3.5 billion in property value.

“The National Flood Insurance Program is vital to protecting Rhode Island homeowners, businesses, and property throughout the state,” said Senator Jack Reed in a statement. “Families shouldn’t have uncertainty hanging over their heads because Congress failed to get its work done on time. Congress must address this issue now to prevent flood insurance from lapsing as it works out a long-term extension and needed reforms.”

The office of Senator Sheldon Whitehouse released the following statement, “While Senator Whitehouse intends to support this short-term extension to protect Rhode Island property owners, he continues to push for long-term solutions that will give homeowners greater stability and security, and for broader recognition of the coastal hazards of sea level rise.”

Senator Mitch McConnell, Republican majority leader, has said that he intends to force a vote on the reauthorization before NFIP is due to expire, but he’s running out of time.

If the program does end up expiring there are a number of options for homeowners who are still seeking flood insurance. First is private insurance. Homeowners can buy private flood insurance that meets many of the same requirements and levels of coverage that the government backed NFIP insurance does. Some companies offering private flood insurance are the collective group, Lloyds of London; an online company, The Flood Insurance Agency; as well as a local insurance agency, OceanPoint Insurance.

AIG, the international insurance and finance company, is also writing flood insurance policies as part of their homeowners insurance, for those with homes in particular, lower-risk, flood zones.  

Private flood insurance markets are becoming more and more popular, offering an alternative to the debt ridden and bureaucratic NFIP, which is over $20 billion in debt, due to large claims from Hurricanes Irma, Maria, and Harvey last year.

When asked about flood insurance options if NFIP falls though, Roger Messier, president of Butler & Messier Insurance in Pawtucket said, “There’s not a lot.”

He mentioned Lloyds of London and AIG as a possible options, but primarily for lower-risk homes that don’t have a high chance of becoming complete losses in flooding conditions.

“If the feds get out, some of these programs are really going to watch what they’re writing,” said Messier, referring to the private insurance programs that homeowners will have to turn to if NFIP expires. “They’re not going to write all that the feds are writing. They’ll take the guy that’s a little bit up the street, but not the guy right on the beach.”

That’s because the “guy right on the beach” has a much higher chance of getting completely flooded, and thus requesting a big claim, than someone in a less dangerous flood zone.

“If the feds get out those on the beach will have a tough time getting covered,” said Messier.

He also declared that in most cases homeowners won’t be able to get the insurance company that’s writing their homeowners insurance currently, to also write them a policy for flood insurance, with the caveat being the AIG program.

NFIP is financially flawed, as shown by the huge amounts of debt that the program carries, some of which had to be forgiven by the U.S. Treasury last year, but there are some state-level programs that are seeking to become an alternative to NFIP.

As reported by Insurance Journal, about 15 percent of all premiums are now through private insurance rather than the federal government, but private insurers still make up a relatively small piece of the entire flood pie.

In an article sent to the Beacon on Friday, Lisa Miller, a former Florida Deputy Insurance Commissioner, laid out the way Florida has created the regulation and structure for a thriving private flood insurance market there. This has reduced prices for homeowners, with premiums under private insurance in Miami-Dade County falling to $677 on average, compared to the NFIP policy average of $980, according to data compiled by the Security First insurance company.

Also, as stated in the article, the number of private insurance companies writing flood in Florida has risen from 10 in 2016, to 25 as of July 2018.

If NFIP falls through home sales may be affected too, as homes in flood zones must have flood insurance before a buyer can acquire a mortgage on the property.

Regardless of what happens on Capitol Hill, out in the Atlantic more storms are brewing, with the potential for more flooding, and they wait for no one.