GNO, Inc. Issues Report on NFIP: Key Questions of Financial Structure and Management
New Orleans, LA – Today, Greater New Orleans, Inc. (GNO, Inc.) released a report on key questions of financial structure and management for the National Flood Insurance Program (NFIP). The report sought to answer questions about the financial status of the NFIP; uses of premiums beyond payment of claims; number of policyholders across the nation that will be negatively impacted; if funds had been swept from FEMA in surplus years; and why forty percent of federally backed mortgages that are required to carry flood insurance do not.
“The National Flood Insurance Program requires reform to ensure its long-term financial stability,” said Michael Hecht, President and CEO of Greater New Orleans, Inc. “But in order to fix NFIP, we need to understand NFIP, and ensure it is efficiently structured and managed. It is irresponsible to introduce drastic reforms that will potentially devastate hundreds of thousands of American home- and business-owners, before basic questions about forgone revenues and high costs are answered. To proceed otherwise, destroying the wealth of innocent Americans – who have done exactly as the government has told them, maintained insurance and often never flooded – is both economically unwise and morally unjust.”
Key findings include:
- FEMA does not disagree with the assertion that forty percent of federally backed mortgages do not carry required flood insurance; however, they do not believe that full participation would help make the NFIP solvent.
- FEMA does not possess data on the number of policyholders who will be negatively impacted, and expects it to take more than a year to obtain this data via the affordability study required as part of the Biggert-Waters Act.
- Thirty percent of premiums go towards commissions and servicing costs for insurance companies who service NFIP policies – but bear no risk.
The report is a follow-up from a roundtable GNO, Inc. hosted on August 8 with David Miller, Associate Administrator of Flood Insurance and Mitigation with FEMA, members of the Louisiana Congressional delegation, and state, parish and business leaders where several questions about the financial status of the program were raised.
Since May 2013, GNO, Inc. has organized a growing national coalition of business and elected leaders to address harmful changes to the NFIP. As founders of the Coalition for Sustainable Flood Insurance (CSFI), the organization works to address drastic and unintended increases to NFIP rates for home and business owners. A confluence of the Biggert-Waters Act of 2012 (meant to stabilize NFIP), incomplete FEMA maps and questionable actuarial calculations has led to premium increases of up to 3,000% and more for policy-owners who have never flooded. CSFI now represents over fifty organizations from states across the Gulf and East Coasts. Since GNO, Inc. began its work on this issue, legislation delaying implementation of Section 207 of Biggert-Waters has passed the full U.S. House of Representatives and the Senate Appropriations Committee.
A copy of the report can be found here: http://gnoinc.org/wp-content/uploads/NFIP-Report-FINAL-2013.09.10.pdf