PRESIDENT OBAMA SIGNS EXTENSION ON NATIONAL FLOOD INSURANCE PROGRAM, BUT PROGRAM EXPIRES ON SEPTEMBER 30, 2010!

FOR IMMEDIATE RELEASE
Lewisville, Texas, United States of America (Free-Press-Release.com) September 1, 2010 -- WASHINGTON, D.C. -- President Barack Obama today signed the National Flood Insurance Program Extension Act of 2010, H.R. 5569, which Congress passed on June 30, 2010.

Despite the recent approved legislation that extends the NFIP through September 30, 2010, (and allows the coverage to be retroactive to coverage lapse period from June 1, 2010, to the date of enactment of the extension,) the fact that the program expires at the beginning of the 2010 Hurricane Season should set off alarm bells in the offices of the insurance industry across the U.S.

The NFIP funding program is a victim of a political tussle, stuck in the middle of a Congressional funding fight, and held up by a House committee that demanded a specific explanation by the White House to explain exactly how Congress was expected to fund a consumer-based program that benefits the insurance industry in the middle of the country’s deep recession.

After bickering back and forth between parties, legislation passed for a short-term extension through Sept. 30, 2010. However, the go-forward viability of the program is in doubt as members on both sides of the aisle in Congress were quoted in the Washington Post saying that the country could no longer fund a billion-dollar program that provides financial aid to the nation’s insurance industry for the limited few who are exposed to annual flood worries.

According to industry reports, only one in 10 U.S. households carries Flood Insurance as a part of their Homeowners Insurance coverage.

Why the worry about the poor timing of the expiration of the program? Consumers should understand that when signing a policy for Flood Insurance, on average the policy takes 30 days to activate.

Consumers are warned to plan for the Hurricane Season accordingly, and get more informed from your local insurance agent about the timing and ramifications of the expiration of the NFIP on Sept. 30. Do not get caught without the proper insurance if you’ve had Flood Insurance in the past.

20 QUESTIONS ABOUT FEMA’s NATIONAL FLOOD INSURANCE PROGRAM

What is the National Flood Insurance Program (NFIP)?

The NFIP is a Federal program enabling property owners in participating
communities to purchase insurance protection against losses from
flooding. This insurance is designed to provide an insurance alternative
to disaster assistance to meet the escalating costs of repairing damage
to buildings and their contents caused by floods.

Participation in the NFIP is based on an agreement between local
communities and the Federal Government that states if a community will
adopt and enforce a floodplain management ordinance to reduce future

flood risks to new construction in Special Flood Hazard Areas, the
Federal Government will make flood insurance available within the
community as a financial protection against flood losses.

Why was the NFIP established by Congress?

For decades, the national response to flood disasters was generally
limited to constructing flood-control works such as dams, levees, sea-
walls, and the like, and providing disaster relief to flood victims. This
approach did not reduce losses, nor did it discourage unwise
development. In some instances, it may have actually encouraged

additional development. To compound the problem, the public generally
could not buy flood coverage from insurance companies, and building
techniques to reduce flood damage were often overlooked.

In the face of mounting flood losses and escalating costs of disaster
relief to the general taxpayers, the U.S. Congress created the NFIP.
The intent was to reduce future flood damage through community
floodplain management ordinances, and provide protection for property
owners against potential losses through an insurance mechanism that
requires a premium to be paid for the protection.

How was the NFIP established and who administers it?

The U.S. Congress established the NFIP on August 1, 1968, with the
passage of the National Flood Insurance Act of 1968. The NFIP was
broadened and modified with the passage of the Flood Disaster
Protection Act of 1973 and other legislative measures. It was further
modified by the National Flood Insurance Reform Act of 1994, signed
into law on September 23, 1994. The NFIP is administered by the Federal Emergency Management Agency (FEMA), a component of the
U.S. Department of Homeland Security (DHS).

What is a flood, according to FEMA?
A flood is defined in the Standard Flood Insurance Policy (SFIP), in part, as:

A general and temporary condition of partial or complete
inundation of two or more acres of normally dry land area or
of two or more properties (at least one of which is your
property) from overflow of inland or tidal waters, from
unusual and rapid accumulation or runoff of surface waters
from any source, or from mudflow.

What is a Special Flood Hazard Area (SFHA)?

In support of the NFIP, FEMA identifies flood hazard areas throughout

the U.S. and its territories by producing Flood Hazard Boundary Maps
(FHBMs), Flood Insurance Rate Maps (FIRMs), and Flood Boundary and
Floodway Maps (FBFMs). Several areas of flood hazards are commonly
identified on these maps. One of these areas is the Special Flood
Hazard Area (SFHA), a high-risk area defined as any land that would be
inundated by a flood having a 1-percent chance of occurring in any given
year (also referred to as the base flood).

The high-risk-area standard constitutes a reasonable compromise
between the need for building restrictions to minimize potential loss of

life and property and the economic benefits to be derived from floodplain
development. Development may take place within the SFHA, provided
that development complies with local floodplain management
ordinances, which must meet the minimum Federal requirements. Flood
insurance is required for insurable structures within high-risk areas to
protect Federal financial investments and assistance used for acquisition
and/or construction purposes within communities participating in the
NFIP.


What is the NFIP’s Write Your Own (WYO) Program?

The Write Your Own (WYO) Program, begun in 1983, is a cooperative
undertaking of the insurance industry and FEMA. The WYO Program
allows participating property and casualty insurance companies to write
and service the Standard Flood Insurance Policy in their own names.
The companies receive an expense allowance for policies written and
claims processed while the Federal Government retains responsibility for
underwriting losses. The WYO Program operates within the context of
the NFIP, and is subject to its rules and regulations.

The goals of the WYO Program are: policies, insurance industry knowledge; and flood insurance.

Currently, about 100 insurance companies write flood insurance with
FEMA. Ask your local expert!

Do the state insurance regulators have any jurisdiction over the NFIP in their respective states?

As established by the U.S. Congress, the sale of flood insurance under
the NFIP is subject to the rules and regulations of FEMA. FEMA has
elected to have State-licensed insurance companies’ agents and brokers
sell flood insurance to consumers. State regulators hold the insurance

companies’ agents and brokers accountable for providing NFIP
customers with the same standards and level of service that the States
require of them in selling their other lines of insurance.

Private insurance companies participating in the Write Your Own (WYO)
Program must be licensed and regulated by States to engage in the
business of property insurance in those States in which they wish to sell
flood insurance.

How does the NFIP benefit property owners? Taxpayers?
Communities?

Through the NFIP, property owners in participating communities are able

to insure against flood losses. By employing wise floodplain
management, a participating community can protect its citizens against
much of the devastating financial loss resulting from flood disasters.
Careful local management of development in the floodplains results in
construction practices that can reduce flood losses and the high costs
associated with flood disasters to all levels of government.

What is the definition of a community?

A community, as defined for the NFIP’s purposes, is any State, area, or
political subdivision; any Indian tribe, authorized tribal organization, or

Alaska native village, or authorized native organization that has the
authority to adopt and enforce floodplain management ordinances for the
area under its jurisdiction. In most cases, a community is an
incorporated city, town, township, borough, or village, or an
unincorporated area of a county or parish. However, some States have
statutory authorities that vary from this description.

Why is participation in the NFIP on a community basis rather
than on an individual basis?

The National Flood Insurance Act of 1968 allows FEMA to make flood

insurance available only in those areas where the appropriate public
body has adopted adequate floodplain management regulations for its
flood-prone areas. Individual citizens cannot regulate building or
establish construction priorities for communities. Without community
oversight of building activities in the floodplain, the best efforts of some
to reduce future flood losses could be undermined or nullified by the
careless building of others. Unless the community as a whole is
practicing adequate flood hazard mitigation, the potential for loss will not

be reduced sufficiently to affect disaster relief costs. Insurance rates
also would reflect the probable higher losses that would result without
local floodplain management enforcement activities.

Is community participation mandatory?

Community participation in the NFIP is voluntary (although some States
require NFIP participation as part of their floodplain management
program). Each identified flood-prone community must assess its flood
hazard and determine whether flood insurance and floodplain
management would benefit the community’s residents and economy.

However, a community that chooses not to participate within 1 year after
the flood hazard has been identified and an NFIP map has been
provided is subject to the ramifications explained in the answer to
Question 20.

A community’s participation status can significantly affect current and
future owners of property located in Special Flood Hazard Areas
(SFHAs). The decision should be made with full awareness of the
consequence of each action.

What is the NFIP's Emergency Program?

The Emergency Program is the initial phase of a community’s partici-

pation in the NFIP and was designed to provide a limited amount of
insurance at less than actuarial rates. A community participating in the
Emergency Program either does not have an identified and mapped
flood hazard or has been provided with a Flood Hazard Boundary Map
(FHBM), and the community is required to adopt limited floodplain
management standards to control future use of its floodplains. Less than
1 percent of the 20,000 communities participating in the NFIP remain in
the Emergency Program; FEMA hopes to convert all communities to the

Regular Program of the NFIP. For additional information on mapping,
please refer to the “Flood Hazard Assessment and Mapping
Requirements” section of this booklet.

What is the NFIP's Regular Program?

A community participating in the Regular Program of the NFIP is usually
provided with a Flood Insurance Rate Map (FIRM) and a detailed
engineering study, termed a Flood Insurance Study (FIS). (Additional
information on FIRMs and FISs is provided in the “Flood Hazard
Assessment and Mapping Requirements” section of this booklet.) Under

the Regular Program, more comprehensive floodplain management
requirements are imposed on the community in exchange for higher
amounts of flood insurance coverage.

What happens when a community does not enforce its
floodplain management ordinance?

Communities are required to adopt and enforce a floodplain
management ordinance that meets minimum NFIP requirements.
Communities that do not enforce these ordinances can be placed on
probation or suspended from the program. This is done only after FEMA
has provided assistance to the community to help it become compliant.

What is probation?

Probation is the formal notification by FEMA to a community that its
floodplain management program does not meet NFIP criteria. It is an
action authorized under Federal regulations.

When can a community be placed on probation?

A community can be placed on probation 90 days after FEMA provides
written notice to community officials of specific deficiencies. Probation
generally is imposed only after FEMA has consulted with the community
and has not been able to resolve deficiencies. The FEMA Regional

Director has the authority to place communities on probation.

How long will probation last?

Probation may be continued for up to 1 year after the community
corrects all Program deficiencies and remedies all violations to the
maximum extent possible.

What penalties are imposed when a community is placed on
probation?

An additional $50 charge is added to the premium for each policy sold or
renewed in the community. The additional charge is effective for at least
1 year after the community’s probation period begins. The surcharge is

intended to focus the attention of policyholders on the community’s non-
compliance to help avoid suspension of the community, which has
serious adverse impacts on those policyholders. Probation does not
affect the availability of flood insurance.

What is suspension?

Suspension of a participating community (usually after a period of
probation) occurs when the community fails to solve its compliance
problems or fails to adopt an adequate ordinance. The community is
provided written notice of the impending suspension and granted 30
days in which to show cause why it should not be suspended.

Suspension is imposed by FEMA. If suspended, the community
becomes non-participating and flood insurance policies cannot be written
or renewed. Policies in force at the time of suspension continue in force
for the policy term.

What happens if a community does not participate in the
NFIP?

Flood insurance under the NFIP is not available within that community.
Furthermore, Section 202(a) of Public Law 93-234, as amended,
prohibits Federal officers or agencies from approving any form of
financial assistance for acquisition or construction purposes in a Special

Flood Hazard Area (SFHA). For example, this would prohibit loans
guaranteed by the Department of Veterans Affairs, insured by the
Federal Housing Administration, or secured by the Rural Housing
Services. Under Section 202(b) of Public Law 93-234, if a Presidentially
declared disaster occurs as a result of flooding in a non-participating
community, no Federal financial assistance can be provided for the
permanent repair or reconstruction of insurable buildings in SFHAs.
Eligible applicants may receive those forms of disaster assistance that

are not related to permanent repair and reconstruction of buildings.

If the community applies and is accepted into the NFIP within 6 months
of a Presidential disaster declaration, these limitations on Federal
disaster assistance are lifted.



Explain the discounts on premiums that can be obtained in
communities that qualify for the Community Rating System
(CRS) because they have floodplain management programs
that go beyond the minimum requirements to participate in the
NFIP.

The NFIP’s Community Rating System (CRS) recognizes community

efforts beyond the NFIP minimum standards by reducing flood insurance
premiums for the community’s property owners. The discounts may
range from 5 to 45 percent. The discounts provide an incentive for new
flood mitigation, planning, and preparedness activities that can help save
lives and protect property in the event of a flood.

More information can be found online at http://www.insuranceflowermound.com

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