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Analysts Weigh Chances Next Congress Will Actually Reform Flood Insurance.

Byline: Andrew G. Simpson

Analysts Weigh Chances Next Congress Will Actually Reform Flood Insurance

With the clock ticking on the National Flood Insurance Program's authorization that is set to run out this Friday, Nov. 30, Congress is expected to renew the program short-term by taking one of two routes, either passing a bill to extend it or including an extension in the continuing resolution for funding the government, which is required by Dec. 7.

Earlier this month, insurance industry trades joined organizations from banking, real estate, construction and other industries along with the U.S. Chamber of Commerce to urge the current lame duck 115th Congress controlled by Republicans to act and avoid any lapse. In a letter to House and Senate leaders, the groups warned that a lapse could hurt communities across the country as well as recovery efforts from recent storms.

"A lapse of the NFIP, will leave millions of Americans at risk and cause disruption in the over 20,000 communities across the country that depend on the program. Furthermore, a lapse in the NFIP may slow down recovery efforts related to Hurricanes Florence and Michael by making it harder for disaster assistance recipients to satisfy flood insurance requirements," the letter stated.

Meanwhile, attention is turning to the prospects for long-term reauthorization and reforms of the program by the upcoming 116th Congress in which Democrats will control the House while Republicans will retain a slight edge in the Senate.

"I think there will be a short-term extension. It may not happen by November 30th which is when the program expires. December 7th is when the continuing resolution expires. I think there's a good chance that a short-term extension ends up hitching a ride on continuing resolution and we have a short-term lapse," Ray Lehmann, co-founder and director of insurance policy at R Street Institute, a public policy and research group advocating for free markets and efficient government, said in a recent online discussion of the new Congress with Wells Media.

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Lehmann was joined in the discussion by Charles Symington, senior vice president for external, industry and government affairs at the Independent Insurance Agents and Brokers of America (Big "I"), the largest association of insurance agents and brokers.

[The complete exclusive Symington-Lehmann discussion, (https://www.insurancejournal.tv/videos/17242/) Now What? America's Mid-Term Elections and the Property/Casualty Insurance Industry, is available free on Insurance Journal TV. The (https://www.insurancejournal.tv/videos/17275/) remarks on flood insurance begin here at 15 minutes, 41 seconds into the video.]

Sens. John Kennedy (R-La.) and Robert Menendez (D-N.J.) have introduced legislation to reauthorize the NFIP until the end of next May. That reauthorization does not include any reforms to the program.

Symington and Lehmann are interested in what will happen after a short-term extension. What, if anything, gets done will depend on the two committees that handle not only flood but also other key insurance legislation: the House Financial Services Committee and the Senate Banking Committee.

In the new divided Congress, Rep. Maxine Waters, D.-Calif, will assume the chair of the House Financial Services Committee, replacing Rep. Jeb Hensarling, R.-Tex., who did not run for re-election, while Sen Mike Crapo, R-Idaho, will be the Senate Banking Committee chair.

Rep. Patrick McHenry, R.- N.C., who is expected to be the ranking member on the financial services panel, and Sen. Sherrod Brown, D.- Ohio, who will continue as the ranking member on the Senate banking panel, will also have a lot to say about insurance issues including flood insurance, according to Symington.

Symington notes that the key House committee is losing a fair amount of institutional knowledge because 13 Republicans and five Democrats now on the committee are not returning. Also, the Senate banking committee will lose Republicans Bob Corker of Tennessee and Dean Heller of Nevada along with Democrats' Heidi Heitkamp of North Dakota and Joe Donnelly of Indiana. "So there are a lot of new faces," he said.

The House committee under Hensarling passed some flood reforms but they stalled in the House. Lehmann thinks Waters and the Senate's Crapo could probably come to some agreement, although he doubts they would go as far as Right Street would like, especially on provisions for encouraging a more robust private flood insurance market.

"Most of the reforms I want in the program were things that Jeb Hensarling wanted and that we got through the House last year. I think what Maxine Waters wants is to forgive the debt, just outright erase it. There're some other priorities that have come up regarding mitigation, they would love some money for mitigation, that's something that both sides can agree on. Mapping issues, [Sen.] Bob Menendez [D.-N.J.] has his issues with how you resolve claims disputes. Those things will be in there," he said.

However, Lehmann added, "any significant changes with rates are probably unlikely and it's going to be a tough haul to get the private flood provisions that we want."

Symington agrees with Lehmann that with Waters taking over the financial services helm, many of the proposals Hensarling pushed will go by the wayside. He disagrees with Lehmann, however, on whether all of Hensarling's proposals were good ideas but his association definitely supports increasing the private market to complement the NFIP.

"[I]n terms of legislative accomplishments that's probably where you'll see Maxine [Waters] draw a line in the sand," Symington said. "She certainly will not be looking at those issues through the same prism that Jeb [Hensarling] did. So I think that if you're a fan of the private market for flood insurance, the election probably wasn't so positive, but if you're a fan of the program itself, I think that Maxine is certainly more willing to support the program, extending it probably for a longer period of time than Jeb Hensarling would have done."

In terms of what Congress can do to encourage more private flood insurance, Lehmann said the industry wants clarity on the requirements that particular private policies meet the federal lending requirements, although he acknowledged that this might be done by banking regulation rather than legislation.

There is another piece that Right Street supports that is actually something Democrats also like. This concerns guaranteeing that policyholders with a subsidized policy who leave the NFIP and then later return to the NFIP get their original rate. "There needs to be legislative language to do that. You can't do that just by regulation," said Lehmann.

This so-called "continuous coverage" protection is something agents agree is critical because it gives customers the ability to "test the waters of the private market," according to Symington. He added that the good news is that there is bipartisan support for this and his group is encouraged that it will be part of any flood bill in the next Congress.

Crop Insurance

Both experts believe there is the chance a bipartisan agreement will also be reached on crop insurance, which is part of the giant farm bill that is currently stalled in a conference committee to iron out differences over food stamps between the House and senate versions. This week differences over forestry provisions also emerged, according to the Capitol Hill publication Roll Call.

Symington thinks the farm bill "might be one of those issues where we see a breakthrough in the next couple of weeks, in a so-called lame duck Congress. I think one of the reasons for that is that now with House Republicans losing control, the food stamp fight might not be drawing that oxygen out of the negotiations the way it had been. You had Senate Republicans that were a little more open on that issue to work in a bipartisan fashion; House Republicans were a little more dogmatic on that. So you might not have to deal with that in such as partisan manner with House Democrats looming, taking control."

R Street isn't a big fan of subsidies and backs cuts in crop insurance and caps on food stamps expenditures. But Lehmann is resigned to the new politics. "I think on both angles, the Democrats taking the House makes certain that the food stamp fight is dead and farm-state Republicans and Democrats definitely will come together for more pork-barrel spending," he said.

[The complete exclusive Symington-Lehmann discussion, (https://www.insurancejournal.tv/videos/17242/) Now What? America's Mid-Term Elections and the Property/Casualty Insurance Industry, is available free on Insurance Journal TV. The remarks on flood insurance begin at 15 minutes, 41 seconds into the video.]
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Publication:Insurance Journal
Geographic Code:1USA
Date:Nov 28, 2018
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