National Flood Insurance Program extended but reforms are missing
Lehmann said that most people hit by devastating floods in recent years, think Harvey, didn’t have flood insurance and weren’t in flood zones. Getting those people to buy coverage is important and that’s where the private sector can help.
“It’s possible to make adjustments to the program that will bring it on a better course, but you’re never going to pay down the debt that it already has, and over the long term — given changing flood patterns and climate change — we would expect even bigger issues.”
He said private participation would help get those people to purchase insurance and help with things like investing in mitigation, building levees and damns, constructing natural infrastructure and even buying out properties that are repetitively flooded. Those multiple-loss properties account for less than 2 percent of NFIP policies but for 30 percent of claims.
Lehmann said there has been growth in the private insurance industry as of late, that in 2017 the number of policies grew by about 50 percent over the previous year. That represents about 15 percent of all flood insurance written in the country.
He said there are obstacles to continued growth in the private sector, including clarity from lending regulators on what terms they will accept for mortgages that are federally related and have a flood insurance requirement.
“There’s also the issue that for private companies to offer NFIP policies through the Write Your Own program, they currently have a non-compete [provision] and cannot write their own private policy,” Lehmann said. “We think that should be lifted.”
The extension was the sixth since December. Lehmann is hopeful, but not optimistic that reform can be accomplished rather than continuing the trend of extensions. Debt forgiveness is fine, he said, but some sort of compromise that aims for sustainability would have to be part of it next time.
“From our perspective, the money is already spent so how you account for it is not something I’m terribly concerned with, but I don’t want to perpetuate the cycle,” he said. “As part of a ‘grand bargain’ where we invest in mitigation, invest in better flood maps, move policies to risk-based rates and encourage private insurance, then yes, you can do forgiveness.”