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Regulators: Private flood Insurance needs tweaking to take off in the United States.
  • Timothy Darragh
  • May 2019
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Jim Donelon

Jim Donelon

The property/casualty insurers are ready to go to market, the reinsurance industry is on board, but Congress needs to provide some tweaks if it wants private insurers to fill the wide-open flood insurance marketplace.

Some attendees of the National Association of Insurance Commissioners' Spring meeting in Orlando, Florida, said private insurers are ready to fill more of the marketplace that so far has been dominated by the federal National Flood Insurance Program.

But the anticipated reauthorization of the NFIP needs to allow for what Louisiana Insurance Commissioner Jim Donelon calls a “bounceback” provision, also known as continuous coverage, for a private market to flourish. A recently adopted rule that clarifies the Biggert-Waters Flood Insurance Reform Act of 2012 does not address continuous coverage, said Brooke Stringer, senior financial policy and legislative adviser for the NAIC.

Regulators hope there is language in the reauthorization of the NFIP that will include continuous coverage, she said.

According to Donelon, various drafts of the reauthorized NFIP, which has been extended to May 31, include continuous coverage, which would allow policyholders to switch back and forth between the federal and private programs, as long as they had no lapse in coverage.

Without that provision, consumers won't enter the private market if they understand their insurer could leave the marketplace and leave them without options, he said at a meeting of the Surplus Lines (C) Task Force.

“Without that, we really will be very limited in the take-up of private flood, because the continuous coverage is necessary for protection of those grandfathered with lower rates in higher-risk areas,” he said.

In addition, producers will be at risk for errors and omissions exposure in the event that one of their customers loses insurance and is left without options, he said.

According to Stringer, a reauthorization proposal by House Financial Services Chairwoman Maxine Waters, D-Calif., could feature continuous coverage, but it's unclear what a bill in the Senate would look like. Waters' willingness to collaborate combined with strong support from coastal lawmakers in the Senate may create an opportunity for bipartisan action on a long-term reauthorization, she said.

The reauthorization of NFIP came just as the federal government was entering a partial shutdown.

The initial results of a survey of data by the NAIC show a growing appetite for flood insurance. According to data NAIC released at the meeting:

  • More than 120 insurers wrote private flood insurance in 2018, up from around 90 insurers in 2017 and 50 in 2016.
  • The total direct premium written in states and territories was about $644 million in 2018, compared with $589 million in 2017.
  • States saw a 71% growth in private flood insurance written premiums from 2016 to 2018, with 15 states experiencing over 100% growth.
  • Direct earned premium reported was $606 million in 2018; direct earned premium reported in 2017 was $551 million. For perspective, NAIC said, the NFIP had approximately $3.3 billion in earned premiums in 2017.

Timothy Darragh is an associate editor. He can be reached at

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