Archive Links

Consumer Archive
CU System Archive
Market Archive
Products Archive
Washington Archive

News Now

Private insurance could augment NFIP study says
WASHINGTON (12/21/11)--Premiums charged to policyholders under the National Flood Insurance Program (NFIP) are, in some areas, "too high," and allowing more private insurers to enter the market could increase coverage for many homeowners and lower their flood insurance costs, a recent study by the University of Pennsylvania's Wharton School said.

The Wharton study focused on Galveston and Travis Counties, two Texas counties that are frequently impacted by floods, and calculated "actuarially fair" flood insurance premiums for more than 300,000 residences in these counties.

These calculated rates were compared to actual rates charged by the NFIP, with some of the calculated rates coming in higher than the NFIP rates and some featuring lower totals than the NFIP rates. NFIP premiums were double the calculated rates in a moderate flood risk area of Travis County, and were 16 times the calculated rate in portions of Travis County, which has a lower risk of flooding.

"This presents opportunities for private insurers to provide coverage in some of those areas, to complement the NFIP," study co-author Erwann Michel-Kerjan said.

"There are several practical barriers that would need to be addressed for private insurers to sell such coverage, but if done, this could significantly increase the number of residents with proper coverage, thus reducing the need for government disaster relief," he added.

The NFIP is important to credit unions because the mortgages they write for properties in a floodplain are required to have flood insurance.

The NFIP is administered by the Federal Emergency Management Agency, and was established after private insurance entities refused to offer flood insurance. It is typically reauthorized every few years.

The insurance program will be extended until May 31 once President Barack Obama signs a $1 trillion omnibus federal government funding bill into law. That bill was approved by both branches of the U.S. Congress late last week.

The NFIP was set to expire on Dec. 16. That program has been funded by short-term resolutions for months, as both Democrats and Republicans, including Senate Banking Committee Chairman Tim Johnson (D-S.D.) and ranking minority member Richard Shelby (R-Ala.), have called for the program to be reformed.

The Credit Union National Association supports the short term NFIP extension, but has said a longer term extension should be considered.
Other Resources

RSS print
News Now LiveWire
Stay tuned for coverage of @CUNA's BSA conference which starts Sunday. #CUNABSA #CUNACompliance
1 Day ago
Today's the last day to complete @CUNA's Home Depot data breach survey #StoptheDataBreaches
1 Day ago
Brenda Davis of Cross Roads Ministries will walk through 83 communities during the Ending Hunger Walking tour. (2 of 2)
1 Day ago
The Ending Hunger Walking tour, coordinated by the Maine CU League, kicked off at Old Maine CU in Augusta today. (1 of 2)
1 Day ago
Darwin Brokke of Citizens Community CU represented the #CU Association of Dakotas at a housing summit hosted by @SenatorHeitkamp
1 Day ago