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Understanding the National Flood Insurance Program and the Write Your Own Program (WYO)

Understanding the National Flood Insurance Program and the Write Your Own Program (WYO)

The catastrophic damage caused by flooding during Hurricane Sandy in places like New York City, Hoboken, Jersey City and shore communities like Mantoloking, Union Beach, Ortley Beach, Lavallette and the Hamptons, along with the impact that the Biggert-Waters Flood Insurance Reform Act of 2012 has had on these same communities, has people talking about flood insurance. However, it is important to understand the history of flood insurance as we consider the various issues that Sandy victims now face.

By 1968 most private-sector insurance companies stopped underwriting flood policies because they were losing too much money. As a result, the federal government stepped in to provide an alternative to costly, taxpayer-funded disaster assistance. The National Flood Insurance Program (NFIP) is a federal program that allows property owners to purchase insurance protection against losses from flooding. Congress established the NFIP with the passage of the National Flood Insurance Act of 1968 that provides the NFIP authority and guidelines. All changes since 1968 have been made as amendments to this act, including the Biggert-Waters Flood Insurance Reform Act of 2012. The Federal Emergency Management Agency (FEMA) administers the NFIP.

Participation in the NFIP is based on an agreement between local participating communities and the federal government. The community agrees to implement and enforce floodplain measures (ordinances and laws, i.e. raising houses) to reduce future flood damage to new construction in Special Flood Hazard Areas; the federal government will make flood insurance available within the community as financial protection against future flood losses.

In 1981, FEMA initiated efforts to once again involve the private-sector insurance industry in the NFIP. A cooperative effort between FEMA and insurance company representatives led to the creation of the Write Your Own (WYO) Program in July 1983. The WYO companies issue and service federally backed Standard Flood Insurance Policies under their own names, collect premiums, and handle and pay claims (including attorneys). FEMA pays the WYO companies a fee for these services. In August 1983, FEMA extended an invitation to all licensed property and casualty companies to participate in the WYO Program for fiscal year 1984. So even though a flood policy may be issued by a specific insurance company, the policy is actually underwritten by FEMA.

About the Author: Christopher W. Gerold is an attorney in Wolff & Samson’s Disaster Recovery Claims Group.  Chris represents homeowners and businesses with their Sandy related insurance claims with a special focus on flood insurance. For more information on flood insurance and ways Wolff & Samson can help you with your flood insurance claim, please contact Chris at (973) 530-2061.