The National Flood Insurance Act of 1968 authorized the creation of the National Flood Insurance Program (NFIP) to address the nation’s flood exposure and the unavailability of flood insurance in the private insurance markets. This insurance is designed to provide an alternative to disaster assistance to reduce rebuilding costs and development in the aftermath of disastrous floods. FEMA was overwhelmed by NFIP claims from the 2004 and 2005 hurricane season and Congress had to act to raise the programs borrowing authority to pay claims. Fundamental reforming of the program is necessary to ensure its viability going forward.
Regulation of the property insurance market is handled mostly at the state level by NAIC members but the NFIP is a federal program. To ensure consumers are protected and informed, the NAIC collaborates with the NFIP. This working relationship has developed, among other things, minimum flood insurance training and education requirements for agents who sell flood insurance policies for FEMA.
In the wake of Hurricanes Katrina, Rita and Wilma in 2005 and Hurricane Ike and the Midwest floods of 2008, Congress is looking to reform the NFIP’s structure, function and financial solvency. There is also a push in Congress to expand the flood program to offer wind coverage. The NAIC has called for a more comprehensive insurance policy that offers consumers seamless coverage for all catastrophic perils. The NAIC believes integrating the flood program into such a policy should be considered as part of any flood reform package. |