Reinsurance Association Issues Public Comment on FEMA Notice
* * *
This letter is submitted by the
The RAA is the leading trade association of property and casualty reinsurers doing business in
The RAA supports a long-term reauthorization of the National Flood Insurance Program (NFIP) and flood insurance reforms. The RAA also supports improving America's community resilience in the face of climate and natural disaster risks, including the risk of flooding. We specifically recommend that infrastructure legislation and
Climate Change and Natural Disaster Risks
The RAA has had a longstanding policy on climate change and is committed to working with policymakers, regulators, and the scientific, academic and business communities to assist in promoting awareness and understanding of the risks associated with climate change. A copy of RAA's policy can be found on our website./2
It is especially critical that at the federal, state, and local levels, the public sector in partnership with the private sector address significant natural disaster risks well in advance of the next significant flood, earthquake, or other devastating natural disaster event. Addressing these risks urgently is particularly important as the frequency, severity, devastation, and costs of many natural disasters continue to increase due to climate change.
In the financial services sector, property casualty insurers are the most exposed to natural disasters, especially those impacted by climate and weather. Within the insurance sector, reinsurers have the greatest financial stake in appropriate risk assessment. The industry is at great financial risk if it does not understand global and regional climate impacts, variability and developing scientific assessment of a changing climate. Integrating this information into the insurance system is an essential function. Insurance is a critical component for economic and social recovery from the effects of extreme weather and climate driven events. Open market insurance pricing is also a mechanism for conveying the consequences of decisions about where and how we build and where people chose to live. In this regard, it must be proactive and forward looking in a changing climate/weather environment.
Our industry is science based. Blending the actuarial sciences with the natural sciences is critical to providing the public with the financial resources needed to recover from natural catastrophic events. As the scientific community's knowledge of climate change continues to develop, it is important for our communities to incorporate that information into the exposure and risk assessment process and that it be conveyed to stakeholders, policyholders, the public and public officials that can or should address adaptation and mitigation alternatives. Developing an understanding about climate and its impact on various risks - for example, droughts, heat waves, the frequency and intensity of tropical hurricanes, thunderstorms and convective events, rising sea levels and storm surge, more extreme precipitation events and flooding - is critical to our role in translating the interdependencies of weather, climate risk assessment and pricing.
Climate-related and natural disaster risk exposure is broad-ranging. These risks are widespread, geographically diverse, and include a range of natural disaster perils impacting homeowners and renters, property owners, servicers, mortgage investors, taxpayers, and communities. It is important to ensure that these risk exposures are addressed and mitigated. Mitigation includes physical enhancements and insurance to better protect residential properties and other infrastructure against damage caused by natural disasters. For government programs, government-sponsored enterprises, private sector financial institutions, and taxpayers, financial mitigation also is important to protect against any mortgage credit default risk associated with natural disaster risk.
The RAA believes a variety of solutions should be used to improve community resilience to the benefit of all those in the value chain of climate and natural disaster risk exposure. The RAA also believes that it is important to address geographic, natural disaster peril, and socioeconomic diversity. Some traditional solutions, like property insurance protections for homeowners certainly can and should be utilized, but new analytical capabilities that increasingly and intelligently can help reduce risk and direct resources to achieving that goal also should be pursued.
Investing in Resilience for America's Communities is Critical, Logical, and Smart
In
The report describes that federal disaster mitigation has saved
There is demand, but the supply is inadequate.
Reducing the impact of climate and natural disaster risk in the first place, followed by other protections like traditional insurance and risk transfer, particularly to benefit low-income and minority homeowners and renters should be the top public and private-sector priority for climate and natural disaster resilience and risk management. That can be achieved by, first, identifying the communities that are most in need and most at risk of significant natural disasters. And second, it can be achieved by creating statutory and regulatory structures and incentives that direct public and private sector investments in infrastructure resilience.
The Administration and Members of
In general, RAA recommends that the
The RAA's Community Disaster Resilience Zones Proposal
Low-income and minority neighborhoods are disproportionately impacted by natural disasters./6
This fact should be a priority consideration for policymakers and the public and private sectors as we work to understand and address the climate and natural disaster-related risks facing communities across America. The RAA has developed an innovative approach to addressing climate and natural disaster resilience, specifically to improve infrastructure resilience in the face of natural disasters and address socio-economic disparities. The RAA urges the Administration, including
The RAA developed an analytical tool and legislative proposal that aligns with President
The RAA's data analytics tool utilizes publicly available data to very clearly, by county, congressional district, and census tract in each state, understand where natural perils, older housing stock, and disadvantaged populations converge. The data in RAA's analytical tool is from
In general, the RAA's proposal would create a federal structure that directs public and private-sector funding for resilience projects to communities most in need and most at risk from significant natural disaster(s). More specifically, it would:
1) Address the impact of climate change through data-driven analysis;
2) Establish community disaster resilience zones, or CDRZ, for communities most in need and most at risk of significant natural disaster(s); and
3) Direct and incentivize public and private-sector investment in the CDRZ to improve infrastructure resilience.
RAA's legislative proposal has a few core components to help achieve these objectives:
I. The first generally would codify, enhance, and utilize the
II. The second would, within CDRZ, coalesce a variety of funding mechanisms, providing a menu of financing enhancements and tax incentives that can focus federal, state, local, charitable, and private-sector investment in resilience projects. For example, to help fund resilience projects in CDRZ the proposal would establish:
* CDRZ taxable direct pay bonds, like Recovery Zone Economic Development Bonds, which were one of three types of Build America Bonds that
* CDRZ tax-exempt facility private activity bonds subject to a separate volume cap, like Recovery Zone Facility Bonds (also in the 2009 recovery legislation), and provide for life and property/casualty insurers' exclusion from proration for investments in these CDRZ bonds;
* Federal transferrable tax credits for individuals for resilience improvements to housing in CDRZ;
* Federal tax credits for charitable contributions for resilience projects in CDRZ; and
* Federal tax credits for community-level projects in CDRZ that are tradeable, transferrable, and do not expire, and allow proceeds from the sale of certified tax credits to be used to, for example, meet matching requirements for federally funded resilience projects.
III. The third would prioritize, set aside, and unlock federal program funding to invest in resilience projects in CDRZ. This could include waiving, reducing, or allowing other forms of financing, such as the proceeds from the sale of tax credits mentioned above and in-kind and charitable donations, to qualify for matching funds for resilience projects in CDRZ. Allowing a variety of resources to contribute to and invest in resilience projects in CDRZ, as they relate to federal program matching fund requirements, could significantly unlock resources for CDRZ resilience projects. For example, with more flexibility to meet matching fund requirements, CDRZ resilience projects could more likely benefit from
In addition, the RAA's proposal has been favorably mentioned during three recent congressional hearings:
*
*
*
Housing is Infrastructure
The Administration and
To that end, the RAA supports language that
The RAA supports continued improvements to Chairwoman Waters's bill, other legislation that may be considered as part of the forthcoming infrastructure package, and
The Protection Gap, Insurance, and the NFIP
Natural Disaster Insurance Protection Gap
Homeowners and renters, property owners, mortgage investors, taxpayers, and communities face risks due to climate change, natural disaster risks, and the lack of insurance coverage or underinsurance of such coverage. There is a serious and significant natural disaster insurance protection gap in
The
Given the likelihood of future, significant, and costly natural disasters throughout the
(In 2020, HUD issued a proposed regulation to align its regulations and guidance with that of the 2019 federal lending regulators)./16
Traditional insurance solutions - such as primary property insurance protection, including earthquake, wind, fire, and flood insurance - are critical for people, property, jobs, businesses, and communities to be resilient in the aftermath of natural disasters. That is especially true since federal disaster assistance is provided only when there is a federally declared disaster and typically results in a fraction of what insurance assistance can provide. For example, according to
Meanwhile, in 2019, federal disaster assistance was capped at
Ensuring that the protection gap is bridged, and property insurance adequately covers the climate and natural disaster risk(s) involved are of utmost importance. Risk transfer products that protect each stakeholder from climate and natural disaster risks can play an important role.
To supplement traditional insurance solutions - including to provide coverage for evacuation and to infuse liquidity quickly into a community to cover immediate post-disaster expenses - parametric insurance addresses the protection gap and enhances community resilience. Parametric solutions have been developed for earthquake, wind, fire, and flood risks. This coverage can be tailored to meet the needs of individuals, public entities, and lenders.
Risk Transfer
Risk transfer, including reinsurance, is a successful solution used by both the public and private sector including (re)insurers, financial institutions, federal and state programs, and government-sponsored enterprises,
National Flood Insurance Program
The RAA greatly appreciates the leadership of Members of
* Continue to strengthen NFIP's financial framework and resiliency so that it can pay claims, particularly after catastrophic events;
* Remove impediments to consumer choice and confirm consumer protections; and
* Modernize the statute to give
From a reinsurance perspective, this statement highlights our top priorities for flood insurance reform. As a member, RAA also supports the SmarterSafer and BuildStrong coalitions' reform proposals, and RAA supports legislation to create a state flood mitigation revolving fund program.
I. Support NFIP Reinsurance Program. The RAA supports
The RAA has long advocated for the NFIP to utilize the private market to help manage the financial burden of the NFIP's catastrophic flood risk by providing financial backing for the government's flood risk, protecting taxpayers, and helping the program to be more resilient and pay claims. In 2021, for the fifth consecutive year,
II. Confirm Consumer Protections. The RAA supports legislation from the 116th
In two previous congresses, similar legislation had broad bipartisan support. In 2016, by a vote of 419-0, the House passed a similar provision as part of H.R. 2901 and, in 2017, by a vote of 58-0, the
Flood insurance uncertainty for consumers, as it relates to continuous coverage and potential rate increases by the NFIP, are an impediment to consumers buying private flood insurance and limit consumers' choices. Insurance agents and brokers have stated that "...the risk of a substantial NFIP rate increase should the consumer later wish to return to the NFIP often makes insurance agents and brokers hesitant to recommend private flood insurance policies."/21
It is important that
III. Modernize 1968
The Part A statutory language currently authorizes the FEMA Administrator (Administrator) to facilitate and assist the creation of a pool of insurers on a risk sharing basis with the Federal government to provide flood insurance through their network of agents and policyholder relationships. Under the statute, the Administrator defines the qualifications of insurers for the pool and risk capital to be provided. The Administrator is authorized to enter into a contractual relationship with the pool defining the insured risk to be retained and the government's risk through its reinsurance of the pool. Pursuant to the statute, the financial arrangement recognizes that the NFIP provides some subsidies to certain policyholders.
The current NFIP program, which is authorized under NFIA Part B, provides that the Federal government through the NFIP would fully bear the insured risk and that insurers could be retained as fiscal agents of the NFIP with no risk bearing role. (The recent exception to that is NFIP's Reinsurance Program referenced above.)
The RAA specifically recommends that NFIP reform and reauthorization legislation include the amendment offered to the "National Flood Insurance Program Reauthorization Act of 2019" and withdrawn by Representative
The amendment language would: (1) Require FEMA to solicit ideas for risk-sharing demonstration programs; (2) Provide FEMA with authority, but not require it, to conduct risk-sharing demonstration programs; and (3) Make technical amendments to the National Flood Insurance Act of 1968 Part A authority, which
The above-mentioned reforms can further facilitate the development of a private flood insurance market and improve the viability of NFIP. The reinsurance market is interested and has the capacity to underwrite flood insurance risk, including extreme flood risk, in both the public NFIP program, private market, and any future public-private flood insurance partnerships. Actions taken in recent years by some states, such as
Conclusion
The RAA looks forward to continuing to work with the Administration, including
View attachment at: https://downloads.regulations.gov/FEMA-2021-0011-0168/attachment_1.pdf
Sincerely,
President
* * *
Footnotes:
1/ https://www.federalregister.gov/documents/2021/04/22/2021-08444/request-for-information-on-fema-programsregulations-and-policies; https://www.federalregister.gov/documents/2021/06/07/2021-11932/request-forinformation-on-fema-programs-regulations-and-policies-public-meetings-extension-of
2/ https://www.reinsurance.org/Advocacy/RAA_Policy_Statements/
3/ https://www.nibs.org/projects/natural-hazard-mitigation-saves-2019-report
5/ https://www.hudexchange.info/programs/htf/; https://www.cdfifund.gov/programs-training/programs/cmf
6/ https://www.americanprogress.org/wp-content/uploads/2013/08/LowIncomeResilience-2.pdf
7/ https://www.whitehouse.gov/briefing-room/statements-releases/2021/03/31/fact-sheet-the-american-jobs-plan/; https://www.whitehouse.gov/briefing-room/presidential-actions/2021/05/20/executive-order-on-climate-relatedfinancial-risk/; https://www.whitehouse.gov/briefing-room/statements-releases/2021/05/24/fact-sheet-bidenadministration-invests-1-billion-to-protect-communities-families-and-businesses-before-disaster-strikes/; https://www.whitehouse.gov/briefing-room/statements-releases/2021/05/26/fact-sheet-the-american-jobs-plan-willproduce-preserve-and-retrofit-more-than-2-million-affordable-housing-units-and-create-good-paying-jobs/; https://www.whitehouse.gov/wp-content/uploads/2021/05/budget_fy22.pdf
8/ https://hazards.geoplatform.gov/portal/apps/MapSeries/index.html?appid=ddf915a24fb24dc8863eed96bc3345f8; https://www.census.gov/programs-surveys/acs
12/ https://financialservices.house.gov/calendar/eventsingle.aspx?EventID=407532
13/ https://home.treasury.gov/system/files/311/December2019FACI_ProtectionGapPresentation.pdf; https://home.treasury.gov/system/files/311/December2019FACI_ProtectionGapProposedRecs.pdf
15/ https://www.fdic.gov/news/financial-institution-letters/2019/fil19008.html
16/ https://www.federalregister.gov/documents/2020/11/23/2020-25105/acceptance-of-private-flood-insurance-forfha-insured-mortgages; https://www.hud.gov/press/press_releases_media_advisories/HUD_No_20_191
17/ https://www.fema.gov/data-visualization/historical-flood-risk-and-costs
18/ https://www.federalregister.gov/documents/2018/10/22/2018-22884/notice-of-maximum-amount-of-assistanceunder-the-individuals-and-households-program;
19/ https://www.fema.gov/flood-insurance/work-with-nfip/reinsurance
21/ https://financialservices.house.gov/uploadedfiles/hhrg-116-ba00-wstate-heidrickc-20190313.pdf
22/ https://financialservices.house.gov/calendar/eventsingle.aspx?EventID=407747; https://financialservices.house.gov/calendar/eventsingle.aspx?EventID=403829
* * *
The notice can be viewed at: https://www.regulations.gov/document/FEMA-2021-0011-0001
TARGETED NEWS SERVICE (founded 2004) features non-partisan 'edited journalism' news briefs and information for news organizations, public policy groups and individuals; as well as 'gathered' public policy information, including news releases, reports, speeches. For more information contact
Belfast curling club must rebuild after burst pipe leads to major water damage
Consortium of Citizens With Disabilities Emergency Management Task Force Issues Public Comment on FEMA Notice
Advisor News
- Nearly half of nonretirees doubt they will fully retire
- How much could failure to fund Social Security cost average Americans?
- How can more Americans achieve financial independence?
- Savers vs. spenders: How money management attitudes impact financial confidence
- Demonstrating the value of life insurance to Gen Z
More Advisor NewsAnnuity News
- Jackson CEO Laura Prieskorn to retire at the end of 2026
- Has your annuity been reinsured in the Cayman Islands? Here’s why it matters
- DOL slams pension risk transfer lawsuit as ‘opportunistic’ litigation
- AM Best Affirms Credit Ratings of New York Life Insurance Company and Its Subsidiaries
- Advisors don’t have an annuity problem; they have an integration problem.
More Annuity NewsHealth/Employee Benefits News
- New Managed Care Data Have Been Reported by Shana L. Metzger and Co-Authors (Centers for Medicare and Medicaid Services staffing regulations in critical access hospitals: Implications for nurse practitioner practice and rural care access): Managed Care
- Florida man arrested after sending 7 former co-workers' paychecks to his own bank account, deputies say
- Insurers hedge on Trump-backed pledge to improve denials process
- SCHNEIDER, SEWELL, OCASIO-CORTEZ LEAD 52 DEMOCRATS URGING SECRETARY KENNEDY AND ADMINISTRATOR OZ TO RESCIND TRUMP POLICY TO ALLOW HEALTH INSURANCE COMPANIES TO OFFER PREDATORY LOANS
- Covered California health insurance premiums for San Joaquin Valley enrollees will rise by about 11% or more in 2027
More Health/Employee Benefits NewsLife Insurance News
- AM Best Comments on Credit Ratings of Horace Mann Educators Corporation and Its Subsidiaries Following Announced Transaction with Medical Mutual of Ohio
- AM Best Affirms Credit Ratings of Hanwha General Insurance Company Limited
- Globe Life boosts Q2 earnings, eyes AI shift for long-term growth
- ATTORNEY GENERAL BRENNA BIRD LEADS FIGHT TO PROTECT IOWA PENSIONS
- AM Best Affirms Credit Ratings of Bao Viet Insurance Corporation
More Life Insurance News