GC’s Enoizi suggests five ways to narrow flood protection gap in Capitol Hill testimony

Guy Carpenter’s Julian Enoizi has told a Congressional hearing that strengthening the National Flood Insurance Program (NFIP), using reinsurance, growing the private market, reducing risk and embracing innovation and new solutions can all help improve risk readiness and mitigate the impact of floods in the US.

The reinsurance intermediary’s global head of public sector solutions made the five suggestions to address the flood insurance gap as he provided testimony to a US House of Representatives subcommittee meeting that also included witnesses on behalf of the Independent Insurance Agents and Brokers of America (Big I) and Wholesale & Specialty Insurance Association (WSIA).

The House Subcommittee on Housing and Insurance on Friday morning held a hearing titled “How Do We Encourage Greater Flood Insurance Coverage in America?”.

Enoizi, who joined Guy Carpenter last year after previously serving as CEO of UK public-private terrorism reinsurer Pool Re, commented: “We must address the flood insurance gap.”

The executive added that studies have shown that individuals and communities with flood insurance recover better and faster than those without.

He highlighted that the main source of flood insurance in the US is the NFIP, which was created in 1968 to address the lack of a private market for flood coverage. The NFIP accounts for more than 95 percent of household policies purchased as of 2018.

“We believe there are five ways to improve risk readiness and mitigate the impact of floods: strengthen the NFIP, protect US taxpayers with reinsurance, grow the private flood market, reduce risk and embrace innovations and new solutions such as community-based catastrophe insurance [CBCI],” Enoizi said.

Enoizi’s testimony noted that the NFIP has more than $20bn of debt and hundreds of millions of dollars in interest payable annually. He said the NFIP needs reform and long-term reauthorisation to become a sustainable source of flood insurance.

“Risk Rating 2.0 is a step in the right direction to align premiums with risk, but the program needs to keep attracting, not losing, policyholders,” Enoizi said in prepared remarks.

Guy Carpenter places reinsurance for the NFIP in its role as broker for the Federal Emergency Management Agency.

The Biden administration has proposed a package of NFIP reforms in which it recognises the role of a private flood insurance market in supplementing and supporting the government-backed program. Enoizi suggested the private market offers the possibility for innovation and products to further close the flood insurance gap.

His testimony also suggested embracing parametric insurance and promoting excess flood coverage to complement the NFIP.

In addition, he noted Guy Carpenter parent Marsh McLennan has pioneered CBCI to enhance financial resilience, provide affordable coverage and create incentives for risk reduction at the community and individual level.

CBCI provides disaster insurance arranged by a local government, quasi-governmental body, or community group to cover a group of properties.

Big I and WSIA support HR 900

Also speaking during the hearing on behalf of the Big I was Christopher Heidrick, owner and principal of Heidrick & Company Insurance and Risk Management Services.

He said the Big I supports making legislative or regulatory changes to some aspects of the NFIP to facilitate continued private market growth in high-risk flood zones, protect consumers and help ensure consumers have affordable insurance choices.

The association strongly supports HR 900, which was recently introduced and would amend the National Flood Insurance Act of 1968 to clarify that private flood insurance can satisfy NFIP continuous coverage requirements.

The Big I also supports allowing refunds for unearned premiums for the mid-term cancellation of NFIP policies if a consumer elects to purchase a policy from the private flood insurance market.

Speaking on behalf of WSIA, Patrick Small, president of Dual Special Flood, also highlighted legislative and regulatory changes that would further improve flood insurance coverage options for consumers and impact their purchasing decisions.

Small noted that currently if a policyholder leaves the NFIP they cannot return under the same rating standard at which they left because their property will not be considered to have been “continuously covered” by mandatory flood insurance.

He said WSIA strongly supports HR 900 because it allows consumers that leave the NFIP for the private market to be considered to have had continuous coverage for purposes of fulfilling their mandatory purchase requirement.

“Implementation of this legislation is a critical step to improving options for consumers and the overall flood insurance market,” he said in prepared comments.

He added that WSIA also believes the inability to receive a refund of unearned premium from the NFIP serves as a disincentive for the consumer to consider the private market.

Small added that long-term reauthorisation of the NFIP would provide greater comfort in the stability and continuity of NFIP coverages.