Bradshaw: Reform, Expand Flood Insurance Options

Steven Bradshaw, testifying on Capitol Hill yesterday on behalf of the Mortgage Bankers Association, said the National Flood Insurance Program is “unsustainable” in its current form and should be expanded to accommodate private flood insurance options.  

Bradshaw, executive vice president with Standard Mortgage Corp., New Orleans, told the House Financial Services subcommittee on Housing and Insurance ( that Congress should support H.R. 2901, the Flood Insurance Market Parity and Modernization Act, which would ease the federal government’s burden on flood insurance coverage by allowing private insurance to meet federal flood insurance requirements.  

“Expanding flood insurance options will make it easier for more homeowners to obtain flood insurance,” Bradshaw said. “A competitive flood insurance market will expand available insurance options, lower costs and increase the number of at-risk properties that are insured.”  

Currently, the NFIP has nearly 5.3 million policies providing more than $1.3 trillion in coverage in 22,000 communities in 56 jurisdictions that participate in the program. As of October 2015, the NFIP had an outstanding debt of $23 billion borrowed from the U.S. Treasury, with $7.425 billion remaining of its total temporary $30.425 billion Treasury borrowing authority.  

Bradshaw noted that last August marked the 10th anniversary of Hurricane Katrina, which devastated New Orleans and other parts of Louisiana and four other states, leaving more than 3,500 Standard Mortgage customers and nearly two-thirds of its staff with significant flood damage to their homes.  

“There is no doubt that the National Flood Insurance Program was a key component of the Gulf Coast’s recovery, just as it has been for other communities across the country that have sustained major flooding,” Bradshaw said. “But there is also no doubt that the NFIP needs to be reformed. The program is $23 billion in debt and simply not sustainable as is. The federal government cannot and should not bear the full burden of post-disaster recovery.”  

While Congress attempted to rectify this in part by passing the Biggert-Waters Act, which said private sector flood insurance must be allowed to develop in order to ensure a stable, sustainable and affordable market. Bradshaw said H.R. 2901, introduced by Reps. Dennis Ross, R-Fla., and Patrick Murphy, D-Fla., (, would expand flood insurance options by making it easier for more homeowners to obtain flood insurance.  

“For example, many homes that were destroyed by Hurricane Katrina were not located in a special flood hazard area,” Bradshaw said. “Homes outside of those zones are not required to have flood insurance. As a result, mortgage servicers were liable for the costs when those homes were wiped out. MBA believes that increased private sector involvement can also serve to shift some of the burden of post-disaster recovery away from the federal government and to the private sector. This will limit taxpayer exposure to future flood losses.”  

H.R 2901 clarifies what constitutes an acceptable private flood insurance policy by providing a clear definition of private flood insurance. “This will make it easier for lenders to accept private policies to satisfy the mandatory purchase requirement,” Bradshaw said.  

Additionally, Bradshaw said H.R. 2901 addresses lenders’ concerns regarding continuous coverage requirements. “Under current law, it is unclear whether someone previously covered under an NFIP policy who moves to a private carrier would be eligible to return to the NFIP policy at their previous rate,” he said. “We are pleased that H.R. 2901 eliminates the disincentive for consumers to choose a private policy. It does so by clarifying that private flood insurance satisfies the continuous coverage requirement.”