Progress has been made in the mission to reauthorise and reform the National Flood Insurance Program (NFIP), with H.R. 2874, also known as the 21st Century Flood Reform Act having now passed the House of Representatives with full approval, including amendments by substitution ensuring measures on reinsurance, risk transfer and flood ILS or cat bonds remain within the legislation.
It’s a real moment of progress for the bill, which follows numerous other attempts to get the NFIP reauthorised for a five-year or more period, and reformed to make flood insurance more affordable and the whole Program more sustainable over the long-term.
H.R. 2874 (as a package of seven bills) passed the House by a vote of 237 to 189, bringing the prospect of the bill now passing onto the Senate into reality.
The bill is not really a single bill anymore, having become a package of seven different bills in a last-minute amendment by substitution that included other measures designed to reform the NFIP, while also calling for the five-year extension to 2022.
The amendment brought six bills that had already been before the Financial Services Committee into the 21st Century Flood Reform Act: H.R. 1422, H.R. 1558, H.R. 2246, H.R. 2565, H.R. 2868, and H.R. 2875.
These bills feature the wording on reinsurance and risk transfer that calls for FEMA to use all available mechanisms to offload risk from the NFIP, with the goal of making it more sustainable, downsized and ultimately less of a risk to taxpayers.
Language from these amendments includes paragraphs stating that the Administrator of the flood program should consider, ” reinsurance, capital markets, catastrophe bonds, collateralized reinsurance, resilience bonds, and other insurance-linked securities, and other risk transfer opportunities.”
It also calls for the Administrator to establish the Federal Flood Insurance Advisory Committee, featuring, “One representative of the financial or insurance sectors who is involved in risk transfers, including reinsurance, resilience bonds, and other insurance-linked securities.”
There’s a long way to go for this Bill and passing the Senate will not be straightforward, as it’s bound to spark disagreements between sides. But this is the furthest any NFIP reform bill has got this year and so the fact it still includes calls for ILS, catastrophe bonds and other reinsurance solutions to be considered to help the Program become more sustainable is encouraging.
FEMA launched its procurement process for a 2018 flood reinsurance program renewal for the NFIP just this week.
Also read: Flood cat bonds? Flood sidecars? How can the NFIP de-risk using ILS?
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