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Former, NAIC Presidents Encouraged by Momentum for Expansion of Private Flood Insurance in the States

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April 11, 2019 – At the National Association of Insurance Commissioners (NAIC) spring national meeting, former Wisconsin Commissioner Ted Nickel and former Missouri Director of Insurance John Huff announced their encouragement of the expansion of the private flood insurance market and regulation by the states. Midwest states were hit hardest by spring floods, where it is estimated that less than 1% of consumers had flood insurance coverage.

“The Midwest continues to suffer from the effects of devasting floods, yet few homeowners have the necessary flood insurance protection. We are now seeing a renewed interest and a real need for the private market to expand flood insurance offerings to give consumers choice and adequate coverage,” said Nickel, former president of the NAIC in 2017. “With an estimated 200 million Americans affected by floods just this year, it will be a shock to some consumers to learn their traditional homeowners coverage will likely not cover flood losses. A competitive private sector flood market could be the solution to increasing coverage for families.”

According to the Reinsurance Association of America (RAA), private flood insurance has been steadily growing in the U.S. with an estimated $623 million direct premium written in 2018.   Recently, federal banking regulators finalized rules to make it easier for banks to accept private flood coverage for federally backed home loans. This rule will go into effect on July 1, 2019. State regulators are expected to lean in to facilitate a smooth implementation of the banking rule along with other enhancements to private market development. Due to the simplification of the banking rule, an increase in consumer awareness, and State Insurance Commissioner support, the private flood insurance market is well positioned to succeed.

“As a former regulator and strong advocate for the U.S. system of state-based insurance regulation, I’ve long supported more private sector underwriting when it comes to flood insurance. The state regulators are equipped with the consumer protection tools to build this market in admitted and excess/surplus lines. Supplementing the U.S. homeowners insurance market with well-regulated private flood insurance could go a long way to close the protection gap between economic loss and insured losses,” said Huff, CEO of the Association of Bermuda Insurers & Reinsurers (ABIR).

Current economic conditions are also conducive to an increased presence of private flood offerings. As an example, international re-insurance markets are well positioned with capital capacity to support an expanded market. Significant advances in private sector flood modeling has generated interest in new product development and private insurers have been writing commercial flood coverage for some time.

A recent report released by actuarial firm Milliman found that, “90 percent of homes [in New Jersey and New York] could see cheaper premiums in the private market.” They also claimed that with the expansion of a private market, high-risk areas could increase the number of homes with flood insurance. This expansion will be critical to closing the coverage gap across the country.

The Florida Office of Insurance Regulation served as the host of the NAIC Spring national meeting and has been a trailblazer in building a viable private flood insurance market to give consumers much needed choice. A recent Wharton Risk Management and Decision Process Center Study on private flood markets found that Florida continues to attract and grow its private flood insurance market by offering favorable regulations and approaches. Florida’s approach has been referenced by other states as a potential model for implementation across the country.

Nickel was the 2017 President of the NAIC, and Huff previously served in that role in 2016.


About ABIR: ABIR represents the public policy interests of Bermuda’s international property and casualty insurers and reinsurers that protect consumers around the world. Members have headquarters and operations in Bermuda with operating subsidiaries in the United States and Europe and do business in more than 150 countries. Over the past twenty years, ABIR members have paid policyholders and ceding companies in the United States and EU over a quarter of a trillion (USD) in claims.

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