The nation’s massive flood coverage gap is back in the spotlight thanks to Hurricane Matthew – but the widespread attention to the many problems associated with the National Flood Insurance Program may be wasted as industry analysts say politics are preventing a key step toward the solution.
The Flood Insurance Market Parity and Modernization Act, H.R. 2901, has stalled in the Senate after unanimous support in the House. Without the passage of the bill, which requires mortgage creditors to consider private flood insurance the same as federal coverage, most standard and surplus lines carriers will not enter the market.
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Without the presence of multiple, more affordable flood options, NFIP is likely to remain in debt and the American people uninsured, many argue.
“We have billions of dollars in capacity we can access, contracts in place waiting to be implemented and up-to-date models ready for use, but the Act is stuck in the Senate,” Craig Poulton, chief executive officer with Poulton Associates, told Insurance Business America
. “And it’s just so crucial it passes because without it, we can’t start to remove some of this risk from the federal balance sheet.”
Industry lobbyists and trade groups, from NAPSLO to PCI, are continuing to push for the bill’s passage, but a number of factors are making it an unlikely possibility in 2016. First, Washington is in election mode and many senators are in tough races. If the Senate flips to Democratic control, a lame duck Congress is unlikely to pass any serious legislation.
The tone of the Senate is also quite different than the supportive tone in the House. Various senators, including Chuck Schumer – who could become the majority leader if Democrats perform well at the polls – have expressed grave reservations on the presence of private insurers in flood risk.
And while the issues that concern Schumer and others are not terribly germane to H.R. 2901, PCI’s Senior Vice President for Federal Government Relations Nat Wienecke says these senators will be unlikely to support any flood bill that doesn’t address at least small-scale NFIP reform.
“There are major concerns on how [2012’s Superstorm] Sandy was handled, which could make it very challenging to get a long-term bill passed in this next session,” Wienecke told IBA.
“Every senator is relevant and so we’re facing an uphill climb in a lame duck session to get anything passed.”
The most likely scenario, Wienecke said, is that the bill will be rolled over into the next year. That means industry leaders will once again need to reeducate lawmakers on private flood insurance and particularly the role of the surplus lines industry, which is to set up a “beachhead” and establish appropriate pricing and coverage.
They will also need to fight for a distinguishing of the issue from the reauthorization of NFIP, which is also up for consideration next year. With a likely contentious fight ahead, the relatively straightforward issue of market parity could be in danger if not considered separately.
IBA Northeast: Post-Sandy anger at insurers shouldn’t prevent greater coverage rates for flood
IBA Southeast: Hurricane Matthew underlines need for private flood market