U.S. House, Senate Introduce Bill to Facilitate Private Flood Insurance

I am pleased to note the introduction on June 25, 2015, of bipartisan legislation in both the U.S. House and U.S. Senate which would help facilitate flood insurance coverage options beyond the National Flood Insurance Program (NFIP).

The Flood Insurance Market Parity and Modernization Act, as the legislation is called, has been put forward in each chamber. Representatives Dennis Ross (R-Fla.) and Patrick Murphy (D-Fla.) introduced the bill as H.R. 2901 in the House, and Senators Dean Heller (R-Nevada) and Jon Tester (D-Mont.) introduced it as S. 1679 in the Senate.

The proposed legislation is of crucial importance in allowing consumers viable options for flood coverage other than the debt-ridden NFIP, currently estimated to be underwater by $24 billion. According to an article by Andrew G. Simpson in Insurance Journal, outgoing FEMA deputy associate administrator Brad Kieserman testified June 2, 2015, before the U.S. House Financial Services Committee that the NFIP was a “melting iceberg” whose shortcomings were amplified by claims issues following Hurricane Sandy.

We expect the surplus lines market to play a crucial role in supplying private flood insurance to consumers. Given the high-capacity nature of flood risks, it seems unlikely that the admitted market would have the ability to insure these kinds of hazards.

A few months ago, we at the SLA learned that there were efforts to include language in the bill that would have prohibited the placing of the risks with the surplus lines market. I went to Washington, D.C., and met with key members of the committees of jurisdiction—the House Financial Services Committee and the Senate Banking Committee—to explain why the admitted market was unlikely to take on a significant portion of the flood risk and that, consequently, allowing surplus lines coverage would be crucial to any privatization effort. I also wrote every member of those two committees and sent them the SLA’s Legislator/Regulator packet that explains who we are, what we do, and why we are necessary for insurance consumers.

I applaud members of Congress from both parties who saw the wisdom of allowing a role for surplus lines in this bill, which I am pleased to report that this new legislation does. Our efforts toward achieving that result are the kind of work that your association needs to do to ensure that your role, as a crucial link in the insurance marketplace, is protected. We will continue to seek out opportunities to inform legislators and regulators about the surplus lines industry and its very necessary role in ensuring that consumers can get the coverage they need.