FEMA Asks Congress for Two-Year
NFIP Extension

With the expiration of the current authorization of the National Flood Insurance Program (NFIP) looming, the Federal Emergency Management Agency (FEMA) sent a letter to Congress on April 17 asking that it pass a two-year NFIP extension.

The flood insurance program faces its next expiration on May 31. The full House and the Senate Banking Committee have passed a comprehensive reform bill (H.R. 1309) that includes a five-year reauthorization. All that remains is for the full Senate to pass it; then a conference would be needed to resolve differences. But so far, Senate Majority Leader Harry Reid hasn't indicated whether he will call the bill up before the flood insurance program expires.

"PIA continues to advocate that the Senate move a comprehensive flood insurance reform bill with a five-year reauthorization, however avoiding another lapse by securing a multi-year extension becomes even more critical as the scheduled May 31 expiration of the flood insurance program draws closer," said Mike Becker, assistant vice president of federal affairs of PIA National, in comments to the National Underwriter, which noted that PIA joined the American Insurance Association (AIA) and the National Association of Mutual Insurance Companies (NAMIC) in voicing support for more certainty, a five-year extension.

"If the Senate is unable to pass a five-year extension with the many needed reforms in the time remaining prior to May 31, PIA would support FEMA's request to extend the current program for two years," he said. "Such a move could avert a serious disruption in the market and provide a measure of stability for the millions of Americans who rely on the continued availability of flood insurance coverage."

What It Means to Agents: FEMA decided that it was better to act early to secure a multi-year extension for the NFIP, rather than risk expiration. PIA still supports enactment of H.R. 1309 but if the legislative calendar precludes passage, a multi-year extension is preferable to a short extension or allowing the flood program to lapse again.

Industry Splits on NFIP Extension (National Underwriter 4/24/12)
FEMA Letter to Congress (4/17/12)

Electronic Proof-of-Insurance Bill
Approved by House, Heads to Senate

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Officials of the state-run property insurer of last resort Friday told their board of directors that the 10.5 percent average rate increase approved in April may have to change. Steve Cottrell, chief financial officer of Louisiana Citizens Property Insurance Corp., told the Citizens board that as the new rates were being programmed into the Citizens computer system, "we found data anomalies" in the rate structures in two parishes and "eight others looked a little funny to us."

Cottrell said the major factor was the cost of wind and hail coverage in those areas and how they affected the overall rates. "We want to be rock solid that e (the rates) make sense and are the right thing to do," Cottrell said.

The two parishes where the problem cropped up are in southwest Louisiana, said Citizens Chief Executive Officer Richard Robertson. He said he did not know where the eight other possible problem parishes are located.

Citizens officials did not disclose the names of the parishes.

Robertson said that "all of the rates are in question," so Citizens will have to re-check the data to make certain there are no other problems. The rates are scheduled to go into effect June 1 for new and renewing policies.

Robertson said after all of the parishes are checked, "I suspect (the rates adopted in April) will go down somewhat.… There should be some movement downward."

Cottrell agreed that any changes based on a review of the wind and hail coverage should result in lower rates.

Neither Citizens executive would estimate how much the rates could change. The new rates will have to be resubmitted to the board and reviewed again by actuaries on Insurance Commissioner Jim Donelon's staff.

By law, Citizens can not have rates that are competitive with the private market. Citizens has to charge at least 10 percent more than the highest premiums in an area.

The rate review may delay the implementation of the new rates by June 1, an angry Donelon told Cottrell at the meeting. "You are delaying … something that the board has already done and the law requires" by June 1.

Donelon told Cottrell he wants to meet with Citizens actuaries and other officials as soon as possible.

By Ed Anderson,
The Times-Picayune, April 20, 2012

The legal maneuvering continues between Louisiana Citizens Property Insurance Corp. and 18,500 policyholders involved in a class-action lawsuit over claims adjustments from hurricanes Katrina and Rita.

In the latest round, Citizens asked a 19th Judicial District judge to stop the insurer's bank, Regions Bank, from turning over $104.6 million to the policyholders. Judge Timothy Kelly's order, signed at 7 p.m. Thursday, temporarily prevented the East Baton Rouge Sheriff's Office from taking the money under an order from the 24th Judicial District Court.

Kelly also set an April 30 hearing for a permanent halt to the seizure.

The original judgment, issued three years ago in 24th Judicial District Court, was $92.9 million, but legal interest is adding around $10,200 each day to the total.

Citizens attorney James Babst said the insurer is a "political subdivision" of the state, and therefore its assets are exempt from seizure.

Political subdivisions include school boards, sheriffs and any other public or governmental bodies not considered a state agency.

Under the Louisiana Constitution, the governing bodies of political subdivisions decide whether to pay legal judgments, Babst said. Citizens' governing body is its board of directors.



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