Posted On: February 22, 2019

In 2017, House Financial Services leadership announced that the flood insurance reform would be a priority. The flood program was going to expire on September 30th, in 2017. However, several controversial reform bills were introduced that stalled in Congress.  Once the 2017 hurricane season hit, Congress changed focus which led to multiple short term extensions of the flood program. 2018 saw many extensions which turned into program lapses and more week-long extensions. Just like 2017 and 2018, the year 2019 might not be any different. However, there is always hope for true reform. Late 2018 Congress voted on a standalone bill to extend the flood program to may 31st of 2019 to set up a time to develop a better, long term reform. This time, however, Chairwoman Maxine Waters the of House Financial Services Committee has announced the flood insurance reform as a committee priority. A few goals have been set, improved mapping, affordable and long-term reauthorization for at least five years should help stabilize concerns about the flood program's turbulence. However, if a deal is not met by May 31st, there will be more short term extensions. Change to the National Flood Insurance Program happens often. However, the Federal Emergency Management Agency (FEMA) will bring in the most significant change in the program's history. Risk Rating 2.0 (which is a redesign of the program's rating structure and model), the goal of the program is to create a gradual rating system that focuses less on flood zones and more of variables like the source of water and building characteristics. Unfortunately, not much has been reported about these coming changes, which has led to some reports mischaracterizing the Risk Rating 2.0 goals and visions. What is known about Risk Rating 2.0 is that FEMA is working to incorporate better technology and modeling to modernize the rating structure. Parallel to the National Flood Insurance Programs, the banks, and other federally regulated institutions are required to agree with the mandatory purchase of flood insurance requirement face changes as well. The section of the Biggert-Waters Flood Insurance Reform Act in 2012 required lenders to accept private flood insurance to settle the flood insurance requirement. However, many believe the changes in the law confused the question of acceptability and decreased the necessary increase of the private flood insurance market. Numerous legislative efforts and private industry attempts since that time have focused on clearing up aspects of the law that cause doubt among some lenders. Late in January, the final rule was released by the FDIC related to private flood insurance, and a multi-agency announcement was issued this month while some uncertainty remains with the release of this final rule. This new rule will become effective on July 1st. It is assumed that the lender acceptance of private flood insurance policies will increase, which should be a lift to the expanding private flood insurance market. However, much has not yet been determined. 2019 should give us a reliable indicator of what the future of federal flood insurance will bring. Original article: