AEC firms and their developer clients should be watching the progress of two bills wending their way through Congress that, if passed, could become important first steps toward opening the writing of flood insurance policies to private-sector carriers.
The U.S. House of Representatives recently passed HR 2901, the Flood Insurance Market Parity and Modernization Act of 2015, on a vote of 419-0. The U.S. Senate is currently reviewing similar legislation, SB 1679, on which it is expected to vote this summer.
The bills expand upon the controversial Biggert-Waters Flood Insurance Reform Act of 2012, which clarified the intent of Congress to get the private insurance sector to develop flood-insurance products that could compete with taxpayer-subsidized policies offered through the National Flood Insurance Program (NFIP).
That program is more than $23 billion in debt and has more than $1.1 trillion in total property exposure. NFIP’s main problem has been that it hasn’t been charging policyholders enough for flood coverage, explains Anthony Kammas, a partner with New York-based Skyline Risk Management, surety and insurance brokerage, who is also Secretary-Elect of the Professional Insurance Association (PIA).
Biggert-Waters called for the phasing out of subsidies and discounts on flood insurance premiums, and pushing more risk onto private-sector insurers and policyholders. Under Biggert-Waters, 5% of policyholders—including owners of non-primary private residences, business properties, and “severe repetitive loss properties” that are subject to redrawn floodplain maps—would have incurred 25% per year rate increases “until the true risk premium is reached.” Another 10% of policies would retain their NFIP subsidy until the owners sell their houses or let their policies lapse.
Policyholders screamed about those premium hikes, especially since the new maps put a lot more real estate within floodplains.
“It became clear that flood insurance needed to be repriced,” says Kammas. By the government agreeing ultimately to more gradual premium increases that would be priced using actuarial models, “private carriers started to think that they could make money on a primary basis.” Kammas adds that reinsurers are looking for places where they can put investors’ dollars to work.
Last month, PIA and a contingent of members spent two days on Capitol Hill meeting with lawmakers, including New York Sen. Chuck Schumer and New Jersey Sen. Robert Menendez, to urge them to support the bills that would open up the flood market to private carriers.
Kammas says the association’s goal is not to eliminate NFIP—“it will never disappear,” he says—but to make it the carrier of last resort. Kammas acknowledges that NFIP would be needed to provide flood insurance in flood-prone areas for which private carriers are less likely to offer policies. PIA also wants Congress to reauthorize the government flood program for 10 years, instead of annually, which the association believes would lend more stability to the marketplace.
Under NFIP’s “write your own” program, private carriers are allowed to service coverage that’s written by NFIP (Skyline does this). If the Senate passes SB 1679, the next step, says Kammas, would be to get private insurers engaged in offering their own flood-insurance products. (He could not provide names, but Kammas says a number of private insurers have policies that are ready to go.) The terms and conditions of such policies still need to be worked out, however, including their pricing.
“There’s a lot of work to be done, because there’s no historical information in place,” says Kammas.
He says AEC firms and developers need to be paying attention to how floodplains have been rezoned, and to make sure their policies are in compliance with their lenders’ requirements. They should also make sure that, in the event they choose to switch coverage to a private carrier, their current policies provide a continuity of coverage. And lastly, given how there’s no competitive pricing currently, policyholders would need to price-shop carefully to make sure they are getting the coverage that matches their needs at the lowest price.
Related Stories
Codes and Standards | Jul 22, 2022
Hurricane-resistant construction may be greatly undervalued
New research led by an MIT graduate student at the school’s Concrete Sustainability Hub suggests that the value of buildings constructed to resist wind damage in hurricanes may be significantly underestimated.
Building Team | Jul 20, 2022
San Francisco overtakes Tokyo as the world’s most expensive city for construction
San Francisco has overtaken Tokyo as the world’s most expensive city for construction, according to a new report from Turner & Townsend.
Airports | Jul 18, 2022
FAA will award nearly $1 billion for airport projects
The Federal Aviation Administration (FAA) will award nearly $1 billion to 85 airports of all sizes across the country to improve terminals.
Building Team | Jul 13, 2022
The YIMBY movement emerges as valuable advocate for affordable housing
Over the past few decades, developers grew accustomed to nothing but staunch opposition to dense affordable housing project proposals.
Codes and Standards | Jul 12, 2022
USGBC sets out principles for LEED’s future
The U.S. Green Building Council recently published a report containing principles outlining how LEED will evolve.
Codes and Standards | Jul 8, 2022
Inefficient supply chains, outdated project delivery systems hamper construction investment
Constructing and justifying the cost of physical assets such as a manufacturing plant is much more difficult than it was decades ago, according to a report by Steffen Fuchs, senior partner with McKinsey & Company.
Building Team | Jul 7, 2022
Report explores improving architect/contractor relationship
A new study by the American Institute of Architects and the Associated General Contractors of America focuses on improving the relationship between architects and contractors.
Codes and Standards | Jun 15, 2022
Waived tariffs on solar panels expected to boost solar power
The Biden Administration recently waived tariffs on solar panels from four countries in a move advocates say will accelerate the clean energy transition and benefit national security.
Codes and Standards | Jun 14, 2022
Hospitals’ fossil fuel use trending downward, but electricity use isn’t declining as much
The 2021 Hospital Energy and Water Benchmarking Survey by Grumman|Butkus Associates found that U.S. hospitals’ use of fossil fuels is declining since the inception of the annual survey 25 years ago, but electricity use is dipping more slowly.
Building Technology | Jun 9, 2022
GSA Green Proving Ground program selects six innovative building technologies for evaluation
The U.S. General Services Administration’s (GSA) Green Proving Ground program, in collaboration with the U.S. Department of Energy, has selected six innovative building technologies for evaluation in GSA’s inventory.
