Big ‘I’ Flood Update: NFIP’s D2C Proposal and FHA Private Option

Big ‘I’ Flood Update: NFIP’s D2C Proposal and FHA Private

Option— By Joseph Cortina, staff administrator, Big “I" crop insurance task force.

Recently, Big “I" members and industry partners on the Flood Insurance Producers National Committee (FIPNC) met with staff from FEMA to discuss a broad range of issues related to the National Flood Insurance Program (NFIP).

Specifically, the continued rollout of Risk Rating 2.0, NFIP's recent request for information on their Direct-to-Consumer (D2C) proposal, loss avoidance and an update from FEMA on Hurricane Ian were discussed.

The Big “I" has expressed concern with the D2C proposal and how it could impact the future role of independent agents. Both FIPNC and the Big “I" Flood Insurance Subcommittee will continue to collaborate with FEMA to foster growth in the private flood market and the independent agency system.

FIPNC is a coalition comprised of three major insurance associations and industry partners. The coalition includes members of the Big “I" Flood Insurance Subcommittee, which is chaired by Joe Rossi. In other important flood news for Big “I" members, last week, the Federal Housing Administration (FHA) announced that it will start accepting private flood insurance policies for the mortgages it backs. The decision, which will take effect on Dec. 21, 2022, is another critical step in expanding the private market, which will benefit both consumers and Big “I" members.

Specifically, Marcia Fudge, secretary of the U.S. Department of Housing and Urban Development, noted that “flood insurance is required to ensure families and individuals are prepared if disaster strikes."

“Increasing consumer options for this important protection is one way we are building more resilient communities in the face of climate change," she added.

In November 2021, the Big “I" submitted comments to FHA on the proposal to allow consumers to purchase a private flood insurance option. Over the last years, the Big “I" has spent a significant amount of time advocating for this policy change.

Flood Risks Are Increasing Globally and causing devastating damage, with losses running into billions of dollars in the United States and around the world. Flooding can be the result of river flooding, storm surges and flash flooding driven by tropical storm systems, long duration precipitation events and intense storms that drop large amounts of rain in a short time frame. These events are happening with greater frequency around the world. In 2021 alone, flooding accounted for US$ 90bn in losses, US$ 20bn of which were insured. Since insurance is a global business and weather systems recognize no national boundaries, what happens around the world matters. As an example, catastrophic flooding in Central Europe in July 2021 was the costliest natural catastrophe in modern European history and, with estimated overall losses of US$ 54 bn, the costliest flood event globally. Only 22% of losses world wide caused by flooding are insured.

Climate change is increasing the probability of extreme precipitation in many regions, which will lead to more frequent flash floods and disastrous flooding as a result of more frequent weather anomalies that exceed 100 and 500 year event projections. Rising temperatures of the atmosphere and sea surfaces are influencing precipitation patterns. Warmer air can absorb more moisture, which increases the potential for heavy rainfall. Numerous scientific studies analyzed by the Intergovernmental Panel on Climate Change (IPCC) indicate a likely rise in extreme flash floods and river floods going forward. Reinsurance companies, insurance companies and governmental entities are starting to adjust catastrophe models to account for these changes. In addition, more people are becoming aware that just because they do not live in a “flood zone” they are not immune from flooding. u