Wednesday, March 9, 2011


ON Friday the Banking Committee will hold an oversight hearing on the subject of reform of the NFIP [National Flood Insurance Program] that has a statutory sunset date of September 30, 2011. The driver for reform is claims outlays.

But it appears the hearing is turning into a lobbying effort by groups who benefit directly or indirectly from the NFIP's current methods of administration.

I have posted on this issue before but when asked for some nuggets of real reform provided the following:

"First confine federal flood insurance only to FIRM mapped V and A zones.
Second, force the states to use the entirety of state premium taxes for FPM!
Third, turn over all coastal zone flood mapping to NOAA.
Fourth, turn over insurance aspects of the program to Treasury which already sets the policy for last three administrations for NFIP and all federal insurance programs and
Fifth: Allow public flood adjusters.
Sixth: Allow STATE and LOCAL governments to sell NFIP insurance.
Seventh: Charge full actuarial rates for all repetitive loss structures and eliminate the so-called emergency program.
Eighth: Make void ab initio all NFIP policies in violation of FPM ordinances and building codes at time of loss--Yes allow post claim underwriting by the program.
Ninth: Train whomeever it takes to adjust flood claims including determination of FPB compliance and whether prior losses aggregating ACV.
Tenth: Eliminate all coverage for hazards not mapped."

Note that I submitted 25 suggestions to the NFIP reform website.
What most don't understand is that the NFIP is a highly difficult land use program to administer, not really an insurance program. Scientists and engineers should have been the key administrators of the program but instead mostly lawyers with some insurance background have administered the program. This faulty reform effort will be documented by the few Scientists and Engineers who will be giving testimony on the NFIP on Friday. Correction--Key testimony by ASFPM will be presented by an Professional Engineer. And of course the Committee itself is the wrong committee to be holding NFIP reform hearings even thought it has technical oversight. The Science Committees in both houses of Congress should in fact be the oversight committees. So instead of helping to cut back on "free" federal disaster outlays as the NFIP was intended to do, the NFIP has to some degree become a recklessly administered "fake" insurance program where risk reduction, moral hazard issues, and other true spreading of risk principles including avoiding cross subsidization have been ignored.

But hey some think the NFIP is a terrific program. And while reforming how about eliminating all coverage for installed or uninstalled coverage that averages as much as 10-25% of claims outlays?

The witness list is now public and will check for any Scientists or Engineers or other technical disciplines, even actuaries! Initial inspection shows many Craig Fugate former fire fighter and lots of lawyers.

Witness List

Panel One

The Honorable Craig Fugate, Administrator, Federal Emergency Management Agency

Orice Williams Brown, Managing Director, Government Accountability Office

Sally McConkey, Vice Chair, Association of State Flood Plain Managers and Manager, Coordinated Hazard Assessment and Mapping Program, Illinois State Water Survey
Panel Two

Stephen Ellis, on behalf of the SmarterSafer Coalition, and Vice President, Taxpayers for Common Sense, Washington D.C.

Terry Sullivan, Chair, Committee on Flood Insurance, National Association of REALTORS® and Owner, Sullivan Realty, Spokane, Washington

Spencer Houldin, Chair, Government Affairs Committee, Independent Insurance Agents and Brokers of America and President, Ericson Insurance Services, Washington Depot, Connecticut

Franklin Nutter, President, Reinsurance Association of America, Washington D.C.

Sandra G. Parrillo, Chair, National Association of Mutual Insurance Companies and President and CEO of Providence Mutual Fire Insurance Company, Warwick, Rhode Island

Donna Jallick, on behalf of the Property Casualty Insurers Association of America, and Vice President, Flood Operations, Harleysville Insurance, Harleysville, Pennsylvania

Barry Rutenberg, First Vice Chairman, National Association of Home Builders, Washington D.C.