The severely indebted National Flood Insurance Program is facing another hit as it tallies up losses from the devastating late-December flooding in the Midwest and South.
Floods in Missouri and Texas claimed more than 40 lives and caused up to $1.2 billion in damage – enough to spark further discussion over reform to the flood system.
“We need to get the private sector in the flood insurance business and the government out,” said Representative Roger Williams, an Austin, Texas area Republican whose district has been hit twice with severe flooding over the past two years.
For its part, the private sector does seem to be interested. Gainesville, Florida-based The Flood Insurance Agency has been going great guns since its launch in November 2014, operating in 15 states and backed by underwriters at Lloyd’s of London.
“It’s been one continuous, takeoff launch. It’s like a rocket ship,” said TFIA CEO Evan Hecht
. “We’re going to keep the [NFIP] program healthy by offering increased competition.”
Hecht told
Insurance Business last year that he “expect[s] and hope[s]” TFIA will have competition within the private flood market, allowing agents and clients more affordable solutions to their insurance needs.
It seems Hecht has gotten his wish. According to a
Wall Street Journal report, at least five insurers are currently selling flood coverage to homeowners, with one major reinsurer—
Berkshire Hathaway—backing some of those policies.
All of this private market appetite is music to Validus Group Chief Executive Edward Noonan’s ears.
“The US flood-insurance program shouldn’t exist anymore. The private sector can provide all the capacity required,” Noonan told the
Wall Street Journal. “There’s just nothing unique about flood that requires a government program today.
However, the report cautions that legislative action seeking to delay or amend NFIP rate hikes may quash the emerging market. Richard Koon, a deputy insurance commissioner in Florida, admitted that insurers are “concerned about getting in the space without knowing what Congress will do.”
Hecht echoed that sentiment.
“I think that would be unfortunate because my belief is that the private market will not allow people to pay more than they should pay,” he said.
