Banking and Finance Law Daily Wrap Up, FLOOD INSURANCE AND DISASTER RELIEF—ABA supports five-year NFIP reauthorization, suggests updates, (Sep 12, 2025)

By Nora Macaluso

The banking group responded to senators’ request for comment on a proposal to reauthorize and reform the flood insurance program.

The American Bankers Association (ABA) said it “strongly supports” a five-year reauthorization of the National Flood Insurance Program (NFIP), along with authorization for the program to continue processing policies during a lapse and clarification of retroactive treatment to ensure uninterrupted coverage.

The ABA’s recommendations came in a nine-page letter signed by Kirsten Sutton, ABA’s Executive Vice President for Congressional Relations & Legislative Affairs. The letter was addressed to U.S. Sens. Bill Cassidy (R-La.) and Cory Booker (D-N.J.) and also sent to members of the Senate Banking Committee. Senators Cassidy and Booker had requested feedback on how best to reauthorize and improve the program in a request letter dated August 15. The senators posed a series of questions on topics including affordability, mitigation efforts, coverage requirements and limits, and how to address the needs of vulnerable or disproportionately affected populations. They requested responses by Sept. 15.

The NFIP “underpins the stability of the U.S. housing system by protecting borrowers, lenders, investors and communities from the financial risks of flooding,” according to the ABA’s letter. “Stability and clarity in the NFIP’s administration are therefore essential.”

The ABA said many of its members find ensuring compliance with flood insurance regulations “challenging” because of complexity, a lack of guidance, and “inconsistent supervision and enforcement” of the Flood Disaster Protection Act’s mandatory purchase requirement (MPR).

The association recommended narrowing authority for penalty violations to cover only violations that result in a lack of flood insurance coverage on a property that requires it, rather than requiring penalties for “minor, technical mistakes” that banks have made good-faith efforts to correct.

The ABA also suggested updating the MPR framework to encourage broader coverage. The MPR currently applies only to homes with federally related mortgages, “leaving a significant portion of the housing stock uninsured against flood risk,” the letter said.

Congress should also look at federal preemption of state laws that restrict the amount of flood insurance lenders may require, and at recognizing private flood insurance policies that are equivalent to the NFIP requirement for continuous coverage, the ABA said.

The banking association said current statutory coverage limits are “outdated and often insufficient,” particularly in high-cost areas. The ABA recommended tying maximum coverage amounts to the national conforming loan limits for Fannie Mae and Freddie Mac, suggesting increases be phased in to give lenders, borrowers, and insurers time to adjust.

The ABA said it supports the use of annual caps on premium increases and a means-tested affordability program administered separately from the Federal Emergency Management Agency’s (FEMA) risk-based premium calculation.

The association had additional suggestions for FEMA, recommending mandatory, regular updates to the agency’s flood maps; requiring FEMA to provide information on its Risk Rating 2.0 methodology with a formal process for feedback; adoption of uniform federal flood risk disclosure law; and consumer education to raise awareness of flood risk and available insurance options.

Overall, “any reform efforts should avoid abrupt changes” in favor of “gradual, predictable reforms,” the letter said.

Companies: American Bankers Association

LegislativeActivity: ESGNews FinancialStability FloodInsurance