A bill that would open up the flood insurance market was passed by a U.S. House committee Wednesday morning.
The House Financial Services Committee approved the Flood Insurance Market Parity and Modernization Act, H.R. 2901, which seeks to clarify that private insurance would be treated the same as federal flood insurance in cases where homeowners with federally-backed mortgages are required to buy the coverage, according to SmarterSafer.org, which backed the bill.
Rep. Steven Palazzo, R-4, wasn't on the committee but supports the bill.
“Our overall goal is to ensure flood insurance remains available and affordable to homeowners," he said in an email from this office. "Flood insurance is a very complex issue and this bill addresses one of the many problems in Biggert-Waters by helping bring private insurers back into the marketplace. Over the next year, as we come closer to reauthorizing the National Flood Insurance Program, I hope this will be the first of many to tackle flood insurance reform."
Supporters said the bill would provide an alternative for five million property owners who rely on the U.S. government’s National Flood Insurance Program, which is $23 billion in debt.
SmarterSafer said according to various experts and studies, the major obstacle to private sector flood insurance has not been regulation but rather the inability of private carriers to compete with the subsidized premiums offered by the NFIP.
SmarterSafer was formed in 2008 and includes environmental organizations, consumer and taxpayer advocates, representatives of the insurance industry, housing advocates and others.
The current mandatory purchase requirement does not require that the insurance coverage be provided under the NFIP, however, mortgage lenders have said they are uncertain that private flood coverage satisfies current regulations and have mostly only accepted NFIP policies. Thus the bulk of the business is written with NFIP, according to SmarterSafer.
The legislation would define as acceptable a policy issued by a private insurance company that is licensed, admitted, or otherwise approved in the state in which the insured property is located, the group said. A policy issued by a non-admitted insurer, one that hasn't been approved by a state's insurance department, would also qualify.