The House Financial Services Committee this morning approved a proposal intended to encourage more private insurers to write flood insurance.
The committee approved the Flood Insurance Market Parity and Modernization Act (H.R. 2901), which seeks to clarify that private insurance is to be treated the same as federal flood insurance in cases where homeowners with federally-backed mortgages are required to buy the coverage.
The measure was sponsored by Reps. Dennis Ross (R-Fla) and Patrick Murphy (D-Fla).
Supporters believe the bill will foster more competition in the flood insurance market, providing an alternative for 5 million property owners who rely on the U.S. government’s National Flood Insurance Program (NFIP), which is $23 billion in debt.
Supporters include the insurance industry, state insurance commissioners, as well as taxpayer and environmental groups including Taxpayers for Common Sense and SmarterSafer.
Sen. Dean Heller (R-Nev.) has sponsored a similar measure (S.1679) in the Senate.
The current mandatory purchase requirement does not require that the insurance coverage be provided under the NFIP, however, mortgage lenders have said they are uncertain that private flood coverage satisfies current regulations and have mostly only accepted NFIP policies. Thus the bulk of the business is written with NFIP.
The legislation would define as acceptable a policy issued by a private insurance company that is licensed, admitted, or otherwise approved in the state in which the insured property is located. A policy issued by a non-admitted insurer would also qualify.
Pennsylvania Insurance Commissioner Teresa Miller last month testified in favor of the bill on behalf of the National Association of Insurance Commissioners (NAIC) before the House Subcommittee on Housing and Insurance.
Miller said that encouraging additional carriers into the market will provide consumers with additional flood insurance products.
“One of the obstacles that we’ve seen is that many lenders are reluctant to issue mortgages for homes with private flood insurance because they are not sure the coverage meets the requirements of the federal government,” the commissioner testified. “H.R. 2901 would remove that obstacle by requiring lenders to accept private flood insurance if it meets certain coverage criteria and is subject to supervision by state insurance regulators.”
She said that Pennsylvania is already seeing examples of private carriers offering comparable coverage at a lower cost than the NFIP.