The Community Associations Institute urged the Federal Emergency Management Agency to revisit its co-insurance policy for condominium, cooperative and homeowner associations under the National Flood Insurance Program, citing the high cost of premiums and stiff penalties for under-insurance. CAI recommended that FEMA undertake an actuarial study to determine realistic rates that accurately reflect the risk of loss.

Current provisions require community associations to maintain coverage to insure 80 percent of the full replacement value of buildings or pay a 50 percent penalty. CAI believes that the 80 percent coinsurance clause is unnecessary because in some instances there is little or no risk that upper floors of a building will ever flood. The Institute believes that association boards of directors should have flexibility in determining the appropriate amount of coverage after the risk of loss is assessed. CAI further suggested that FEMA establish guidance regarding valuation.

CAI also made recommendations to FEMA regarding loosening requirements for notification and approval of policy cancellation by mortgage holders; raising policy deductibles; establishing consistent flood zone mapping; providing consumer education on the respective coverages of individual and association flood insurance policies; and working to lower the number of erroneous ratings, which is currently 33 percent.

The Community Associations Institute is a nonprofit association created in 1973 to educate and represent the nation's 205,000 community associations—condominium associations, homeowner associations and cooperatives. CAI members include homeowners, associations and related professionals and service providers.