Excess and surplus lines trade group NAPSLO continued its support this week of new legislation that would provide clarity for lenders on private flood insurance solutions.
Testifying before the House Financial Services Subcommittee on Housing and Insurance Wednesday, NAPSLO Executive Director Brady Kelley expressed firm support of the Flood Insurance Market Parity and Modernization Act.
If passed, the bill would amend the Flood Disaster Protection Act of 1973 to make technical changes to requirements for flood insurance, explicitly endorsing private flood insurance issued by non-admitted insurers in addition to those licensed and admitted by state regulatory bodies.
Non-admitted insurers are not barred from offering private flood insurance under the language of the 1973 legislation, but NAPSLO and others are looking to eliminate any possibility of blocking those carriers from the market.
NAPSLO has long worked for this clarification, and was invited by the Subcommittee to represent the insurance industry’s perspective at the hearing. In his testimony, Kelley highlighted the vital role of the surplus lines market in mitigating flood risk.
“Surplus lines insurance provides an important option for consumers seeking coverage for unique or hard to place risks, including flood risks,” he told lawmakers. “NAPSLO supports HR 2901 as it seeks to preserve that consumer option.”
Kelley suggested that as National Flood Insurance Program debt – currently at $23 billion – continues to grow, the pace at which the private market is willing to develop flood insurance programs will be slow. With increased risk and tighter standards from the standard market, consumers whose risks do not fit within the terms and limits of the NFIP will look to surplus lines for solutions.
Specifically, consumers will need alternatives to NFIP policies when: they need higher limits than the $250,000 residential, $100,000 personal contents and $500,000 commercial limits offered by that program; they need enhanced coverage from that offered by the NFIP such as replacement cost of the damaged property rather than the actual cash value of the property, additional sublimits, additional structures or the ability to schedule multiple properties on one policy; or they need additional coverage such as additional living space, basements or business interruption for commercial entities.
With these needs a very real force in the market, Kelley says the new legislation will clarify and strengthen the role of surplus lines insurers in the flood coverage landscape.
“HR 2901 simply preserves the surplus lines market’s ability to solve unique and complex flood insurance risks that exceed or differ from the options available through the NFIP or the standard market,” he said. “NAPSLO’s support for this legislation stems from our desire to preserve that choice for consumers.”