For the 11th time in the last two years, the House has passed yet another short-term extension of the National Flood Insurance Program (NFIP). The NFIP remains the largest source of flood coverage in the U.S.; this extension through September 30, 2019, ensures that the program does not lapse during hurricane season.
The NFIP makes federally subsidized flood insurance available in special flood hazard areas for participating communities. NFIP policies can be purchased directly from the government or from private insurers through the “Write Your Own” program. Many commercial policyholders rely on the NFIP to provide primary-level coverage for up to $500,000 for a commercial building, and up to an additional $500,000 for certain types of personal property. These single peril policies cover direct physical damage caused by flood based on the property’s actual cash value. NFIP does not provide business interruption coverage for lost profits due to a shutdown of an insured’s operations.
U.S. Rep. Maxine Waters (D-Calif.), chair of the House Committee on Financial Services, and U.S. Rep. Patrick McHenry (R-N.C.) proposed the most recent extension. They seek additional time to reach a bipartisan compromise that will end the short-term extensions. A bipartisan group of senators also recently wrote a letter to Chairman Mike Crapo (R-Idaho) and Ranking Member Sherrod Brown (D-Ohio) urging the Senate Banking Committee to reauthorize the NFIP and address the issues that have been pushed down the road with every temporary extension.
As now structured, the NFIP cannot cover the cost of flood losses, which have dramatically increased since the early 2000s. Stakeholders acknowledge the necessity of reform, but the timing and scope of that reform requires consensus between the political parties and states with competing interests based on their flood exposure. The clock starts ticking now.