R Street Praises Reintroduction of Bill to Encourage Private Flood Insurance
Introduced by Reps. Dennis Ross, R-Fla., and Kathy Castor, D-Fla., the Flood Insurance Market Parity and Modernization Act would liberalize the rules governing how privately underwritten flood insurance policies may be used to satisfy federal lending requirements. Under terms of the bill, any company admitted to write policies in a given state, or a surplus lines writer not disqualified by that state, could offer qualifying coverage.
R Street Senior Fellow R.J. Lehmann noted that the expansion of the flood-insurance market has only become more necessary following a series of major catastrophes, including Hurricane Katrina and Superstorm Sandy. While many private insurers have expressed an interest in taking on flood risk and many states are taking encouraging steps towards licensing insurers to do so, the current legislative framework is insufficient.
“As the House Financial Services Committee begins to consider reauthorization of the National Flood Insurance Program, with the first hearing scheduled next week, it’s crucial to remember that the prospects to shrink the program’s $1.1 trillion of total property exposure rely on the emergence of private-sector solutions,” Lehmann said.
Although Congress’ 2012 flood insurance reform bill expressly stated that private flood insurance could be used to satisfy federal lending requirements, the statutory language was limited in scope, applying only to a select number of policies. The Flood Insurance Market Parity and Modernization Act would serve to broaden the scope of the legislation, while also giving additional power back to the states to determine the appropriate guidelines for qualifying policies.
“The NFIP has been on the nonpartisan Government Accountability Office’s list of high-risk federal programs since 2006. In the long run, the NFIP is simply unsustainable, as it remains $23 billion in debt to American taxpayers, a tally it has no ability ever to pay back. America will need a vibrant market of private capital to handle this risk in the years ahead,” Lehmann added.