My name is R.J. Lehmann and I am director of finance,
insurance and trade policy at the R Street Institute. R Street is a think tank
devoted to pragmatic free-market solutions to public policy challenges that has
engaged on Texas property insurance issues since our founding seven years ago.

I write to you in support of H.B. 1306, an act relating to
the provision of flood coverage under insurance policies issued by surplus
lines insurers. Under terms of the bill, Texas surplus lines insurers would be
released from requirements that flood insurance coverage may be placed only
after the insured has completed a diligent search from authorized insurers and
that surplus lines flood insurance may be provided only in amounts that exceed
that obtainable from authorized insurers.

Streamlining the process to obtain flood insurance from
surplus lines insurers would help to bolster the emerging private market for
flood insurance. For the past 50 years, most flood coverage in the United
States has been underwritten by the National Flood Insurance Program, a federal
agency that has been forced to borrow nearly $40 billion from the U.S. Treasury
in recent years to cover its losses. But according to projections by the
actuarial firm Milliman, 92 percent of single-family homes in Texas could find
more affordable coverage in the private flood insurance market, including 88
percent in the highest-risk coastal zones.

According to statutory insurance data provided by S&P
Global, there were $63.2 million of private flood insurance premiums written in
Texas in 2018, up 18 percent from 2017 and roughly double 2016’s total. H.B.
1306 would streamline the process to allow even more Texans to take advantage
of private coverage, including millions of homeowners who currently have no
coverage at all for flood.

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