SmarterSafer Calls on Senate Committee to Move Flood Insurance Reform

April 29, 2016


The Honorable Richard Shelby
Chair, Committee on Banking, Housing & Urban Affairs U.S. Senate
317 Russell Senate Office Building
Washington, DC 20510

The Honorable Sherrod Brown
Ranking Member, Committee on Banking, Housing & Urban Affairs U.S. Senate
713 Hart Senate Office Bldg.
Washington, DC 20510

Dear Chair Shelby and Ranking Member Brown,

The Flood Insurance Market Parity and Modernization Act passed in the House yesterday with unanimous support. SmarterSafer – a broad based coalition of taxpayer advocates, environmental groups, insurance interests, housing organizations, and mitigation advocates— urges the Committee to build on the momentum of the overwhelming House vote by scheduling a vote on this bill. Senators Dean Heller and Jon Tester have introduced S. 1679, a similar bill.

This bill clarifies that consumers can choose to purchase private flood insurance, ensuring that they have additional choices about flood insurance and are not forced to purchase coverage through the federal flood program. Though the recent flood reform laws made clear that the private sector should be encouraged to offer flood coverage, there are regulatory burdens that are making the acceptance of this coverage by lenders difficult.

For many years, the federal government has been the primary provider of flood coverage in the United States through the National Flood Insurance Program (NFIP), which is more than $23 billion in debt and struggling to remain viable. Though the NFIP has provided critical coverage, because of deep subsidies embedded in the program for decades, it has done so at great expense to taxpayers, it has harmed the environment, and it has provided the wrong market signals, actually encouraging people to build in harm’s way. To combat these problems, Congress made changes to the program including phasing in risk-based rates for a segment of policies and clarifying that the private sector could write flood policies in addition to other reforms.

Since the passage of flood reform, private insurers have started to offer flood policies, but regulatory barriers remain to ensuring that lenders accept private coverage for those properties required to purchase flood insurance. Competition should be encouraged and consumers should be able to choose insurance policies that meet their needs. NFIP policies are one-size-fits-all; federal flood policies do not provide choice—they have standard terms, coverage limits, and deductibles. Private insurance policies could have terms and coverage tailored to the interests of the consumer, as well as better incentives for mitigation and resiliency. In fact, private flood policies could allow property owners to purchase enough coverage to ensure they can rebuild after a storm, not constrained by NFIP limits or by the amount of a mortgage.

The Flood Insurance Market Parity and Modernization Act will help stabilize the NFIP and give millions of Americans more choices for flood insurance. We hope that the Committee will support this bill and take an important step towards updating our nation’s federal disaster policies.