RAA backs private flood insurance bill
Legislative proposals aimed at accelerating the development of a private flood insurance market in the US have been welcomed by the Reinsurance Association of America (RAA).
The bipartisan bill introduced by Republican senator Dean Heller and Democrat counterpart Jon Tester would foster a private flood insurance market overseen by state insurance regulators.
Commenting on the proposals, Tester said: "This straightforward clarification to our nation's flood insurance market will encourage private sector participation, increase competition and give consumers more options when shopping for policies."
The legislation seeks to clarify the National Flood Insurance Act of 1968 by defining acceptable private flood insurance.
The 1968 legislation led to the creation of the National Flood Insurance Program (NFIP), which was designed to provide an alternative to disaster assistance in the form of insurance.
Although the bill intended private insurers to provide flood insurance coverage, lenders did not accept that private flood insurance cover met mandatory purchase requirements.
The new bill would clarify that any private flood insurance policy accepted by a state satisfies the mandatory purchase requirement under the Flood Disaster Protection Act of 1973, which made the purchase of flood insurance mandatory for the protection of property within special flood hazard areas.
Noting the appetite among reinsurers to underwrite flood risk in the US, RAA president Frank Nutter said the legislation would facilitate the development of a private insurance market for the peril.
"We applaud senators Tester and Heller for introducing this legislation, which will provide homeowners with more options and, importantly as well, reduce the federal government's role in providing flood insurance through the NFIP," he said.
As previously reported, the NFIP currently owes the taxpayer around $24bn, a figure that includes the impact of the devastation caused by Superstorm Sandy as well as other high-profile flooding events.
Efforts to stabilise the programme were dealt a blow earlier this year when lawmakers suspended the 2012 Biggert-Waters Flood Reform Act, which aimed to increase subsidised rates by 25 percent per year in a bid to get closer to actuarially sound pricing.