MBA, Trade Groups Urge Action on Flood Insurance Bills

The Mortgage Bankers Association and more than a dozen industry trade groups urged House and Senate leaders to support legislation that would remedy many outstanding issues under the National Flood Insurance Program.

The Flood Insurance Market Parity and Modernization Act (S. 563 ( and H.R. 1422 ({“search”:[“steve+king”]})) reaffirm the long-standing acceptability of private sector flood insurance policies to satisfy the mandatory purchase requirement of the National Flood Insurance Act.

The legislation would rectify an unintended consequence of the Biggert-Waters Flood Insurance Reform Act of 2012. The letter notes while the intent of BW-12 was for private flood insurance to satisfy the mandatory purchase requirement, BW-12 includes a well-intentioned definition of “private flood insurance” that, if implemented as drafted, will have the unintended consequence of discouraging lenders from accepting private flood insurance policies that those lenders would have otherwise accepted.

S. 563 and H.R. 1422 correct the BW-12 definition of private flood insurance to allow state insurance regulators to provide the same protections for flood insurance consumers that State regulators provide for consumers of all other lines of insurance, including the homeowners insurance policies on very same properties subject to the mandatory flood insurance purchase requirement.

“S. 563 and H.R. 1422 may serve as first steps to achieving wider availability of private market flood insurance,” the letter said.

In addition, the letter notes the legislation clarifies that continuous coverage by private flood insurance satisfies any statutory, regulatory or administrative continuous coverage requirements.

“Under current NFIP rules, policyholders can permanently lose access to their current NFIP rates if they leave the NFIP and opted to obtain coverage with a private flood insurance policy,” the letter said. “This has created a disincentive for consumers to choose a private policy in lieu of the NFIP and thwarts congressional intent to allow the consumers the choice to seek better or more affordable coverage from a robust private flood insurance market. By clarifying that private coverage satisfies the continuous coverage requirement, S. 563 and H.R. 1422 will help to make these policies a more viable option for consumers.”

However, the letter also noted S. 563 and H.R. 1422 leave in place a legacy provision of the National Flood Insurance Act that caps the amount of coverage necessary to satisfy the mandatory purchase requirement at the lower of the maximum NFIP limits or the outstanding principal balance of the federally guaranteed or regulated loan on the property. “Our support of the Flood Insurance Market Parity and Modernization Act is in no way an endorsement of public policy that would encourage consumers not to fully insure themselves against the risk of flooding, regardless of the outstanding balance of their mortgage,” the letter said.

Joining MBA in the letter: the American Bankers Association; the American Insurance Association; the Association of Bermuda Insurers and Reinsurers; the Council for Affordable and Rural Housing; the Council of Insurance Agents and Brokers; the Financial Services Roundtable; the Independent Insurance Agents and Brokers of America; the National Affordable Housing Management Association; the National Apartment Association; the National Association of Housing Cooperatives; the National Association of Mutual Insurance Companies; the National Association of Professional Insurance Agents; the National Association of Professional Surplus Lines Offices; the National Association of Realtors; the National Multifamily Housing Council; the Property Casualty Insurers Association of America; and the Reinsurance Association of America.