2022 Midterm Elections, the 118th Congress, and Implications for the NFIP: A Post-Webinar Recap

Last week, Lauren Pachman, PIA’s counsel and director of regulatory affairs, participated in a panel discussion hosted by the National Flood Association (NFA), on whose board she serves. She was joined on the panel by Chris Brown of Mindset, Brett Hewitt of the American Property Casualty Insurance Association (APCIA), Travis Johnson of 1607 Strategies, and Alden Knowlton of the Mortgage Bankers Association (MBA), and the webinar was moderated by Tom Glassic of the District of Columbia Insurance Federation (DCIF).

The concept for the webinar was developed before the protracted race for the House Speakership had even begun. By the time it was over, an unprecedented 15 rounds of voting had ended in the ascension of Rep. Kevin McCarthy (R-CA) to Speaker of the House. The week-long process was the first topic addressed, and panelists generally agreed that Speaker McCarthy should not be underestimated when it comes to getting bills passed out of the House and that the Freedom Caucus will remain a force to be reckoned with as this Congress moves forward.

The panelists discussed the likelihood of the 118th Congress passing a package to reform and reauthorize the National Flood Insurance Program (NFIP) this year. Panelists agreed that reforms will need to be narrowly tailored enough to garner bipartisan support generally, of course, but also robust enough to draw the support of specific members in both chambers who have expressed a vested interest in changing the program.

One of the reforms that should be achievable even within those constraints is the passage of a continuous coverage provision, which has historically had bipartisan support. Of course, passage of any NFIP reform bill will hinge on details around its structure and funding, but the 118th Congress will need creatively assembled coalitions to legislate on the NFIP—or anything else.

The struggle every Congress seems to face is the need to reauthorize the program for enough time to allow members to examine it and consider needed reforms, and somehow force members to prioritize that examination before an imminent lapse. For the past decade, Congress has been content to reauthorize the program as-is and only pay attention to it when it is about to expire. Flood insurance advocates need a reauthorization long enough for Congress to examine the program and a mechanism that somehow incentivizes them to improve it during that time.

Finally, no webinar on the NFIP would have been complete without a discussion of Risk Rating 2.0 (RR2). While most policies are now subject to RR2 rating, the final tranche of policies will not finish transitioning to RR2 until March 31, 2023. Even then, though, RR2 struggles may persist for policyholders whose households are considered “cost-burdened” (in which a household spends more than 30 percent of its income on housing-related expenses). Policyholders in cost-burdened households who are still on the “glide path” to actuarially based rates may eventually find those rates cost-prohibitive, particularly when combined with an ever-tightening homeowners’ market. PIA hopes to see the NFIP’s affordability challenges addressed by the 118th Congress before they result in worsening economic struggles, mortgage defaults, or foreclosures for policyholders.

Going forward, we will continue this important dialogue with the Federal Emergency Management Agency (FEMA), industry colleagues, and members of the 118th Congress.