Legislation Highlights Availability of Private Flood Insurance
- quincymakingwaves
- May 23, 2014
- 2 min read
By Arthur D. Postal
Legislation has been introduced in Congress that would clarify that private flood insurance should be an option available to homeowners.
The Flood Insurance Market Parity and Modernization Act of 2014, S. 2381, was introduced in the Senate by Sens. and Jon Tester, D-Mont., and Dean Heller, R-N.V., Thursday.
The House companion bill, H.R. 4558 was introduced by Representatives Dennis Ross, R-Fla., and Patrick Murphy, D-Fla, May 1.
The Property Casualty Insurers Association of America, whose members constitute two-thirds of the insurance companies that help administer the National Flood Insurance Program as Write-Your-Own companies, lauded the legislation and urged Congress to pass it.
“This common sense legislation clarifies the intent of Congress that private flood insurance should be an option available to homeowners,” says Nat Wienecke, PCI senior vice president, federal government relations.
The issue was first raised by commenters to a regulation proposed last year by federal bank regulators aimed at allowing mortgage banks to accept private flood insurance as an alternative to that provided through the National Flood Insurance Program. The rule was mandated by a provision of the Biggert-Waters Act of 2012.
The commenters, groups representing mortgage banks as well as state insurance regulators, questioned whether existing law allowed them to accept private flood insurance. The issue is still pending.
Heller and Tester explained that, when the National Flood Insurance Act of 1968 was passed, it was Congress’ intention that private insurers would provide flood insurance coverage in the United States. Unfortunately, due to a lack of clarity in existing law, lenders have not been accepted private flood insurance as meeting mandatory purchase requirements.
Heller said that S. 2381 would resolve this issue by simply defining acceptable private flood insurance as a policy that provides flood insurance coverage issued by an insurance company that is licensed, admitted, or otherwise approved to engage in the business of insurance in the State or jurisdiction in which the insured building is located, by the insurance regulator of the State or jurisdiction.
“This bill seeks to reassure lenders about the validity of privately issued flood insurance, despite the fact that this insurance has been issued and accepted in the past,” Heller said.
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