{ "id": "IN10450", "type": "CRS Insight", "typeId": "IN", "number": "IN10450", "active": true, "source": "CRSReports.Congress.gov, EveryCRSReport.com, University of North Texas Libraries Government Documents Department", "versions": [ { "source_dir": "crsreports.congress.gov", "title": "Private Flood Insurance and the National Flood Insurance Program (NFIP)", "retrieved": "2024-04-24T04:03:32.857146", "id": "IN10450_27_2024-03-29", "formats": [ { "filename": "files/2024-03-29_IN10450_4b867eae108b049dffc18c7a1fcb028d03fa7445.pdf", "format": "PDF", "url": "https://crsreports.congress.gov/product/pdf/IN/IN10450/27", "sha1": "4b867eae108b049dffc18c7a1fcb028d03fa7445" }, { "format": "HTML", "filename": "files/2024-03-29_IN10450_4b867eae108b049dffc18c7a1fcb028d03fa7445.html" } ], "date": "2024-03-29", "summary": null, "source": "CRSReports.Congress.gov", "typeId": "IN", "active": true, "sourceLink": "https://crsreports.congress.gov/product/details?prodcode=IN10450", "type": "CRS Insight" }, 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"https://crsreports.congress.gov/product/details?prodcode=IN10450", "type": "CRS Insight" }, { "source_dir": "crsreports.congress.gov", "title": "Private Flood Insurance and the National Flood Insurance Program (NFIP)", "retrieved": "2024-04-24T04:03:30.346575", "id": "IN10450_21_2020-10-08", "formats": [ { "filename": "files/2020-10-08_IN10450_1c5f2e894ef0537698728c226747e6d3163a1eb9.pdf", "format": "PDF", "url": "https://crsreports.congress.gov/product/pdf/IN/IN10450/21", "sha1": "1c5f2e894ef0537698728c226747e6d3163a1eb9" }, { "format": "HTML", "filename": "files/2020-10-08_IN10450_1c5f2e894ef0537698728c226747e6d3163a1eb9.html" } ], "date": "2020-10-08", "summary": null, "source": "CRSReports.Congress.gov", "typeId": "IN", "active": true, "sourceLink": "https://crsreports.congress.gov/product/details?prodcode=IN10450", "type": "CRS Insight" }, { "source": "EveryCRSReport.com", "id": 612122, "date": "2019-12-30", "retrieved": "2020-01-02T13:30:35.957318", "title": "Private Flood Insurance and the National Flood Insurance Program (NFIP)", "summary": "The National Flood Insurance Program\nThe NFIP was first authorized by the National Flood Insurance Act of 1968 (42 U.S.C. \u00a74001 et seq.) and was reauthorized until the end of FY2017 by the Biggert-Waters Flood Insurance Reform Act of 2012 (BW-12; Title II of P.L. 112-141). After a series of short-term reauthorizations, the NFIP was reauthorized until September 30, 2020, (P.L. 116-93). In statute, Congress has found that\n(1) many factors have made it uneconomic for the private insurance industry alone to make flood insurance available to those in need of such protection on reasonable terms and conditions; but \n(2) a program of flood insurance with large-scale participation of the Federal Government and carried out to the maximum extent practicable by the private insurance industry is feasible and can be initiated. (42 U.S.C. \u00a74001(b)).\nBy law or regulation, federal agencies, federally regulated lending institutions, and government-sponsored enterprises (GSEs) must require certain property owners to purchase flood insurance as a condition of any mortgage that these entities make, guarantee, or purchase. Property owners are required to purchase flood insurance if their property is identified as being in a Special Flood Hazard Area (SFHA, which is equivalent to having a 1% or greater risk of flooding every year) and is in a community that participates in the NFIP. Historically, this generally has meant such property owners were required to purchase a Standard Flood Insurance Policy (SFIP) from the NFIP. In BW-12, Congress explicitly provided for private flood insurance to fulfill this mortgage requirement instead of the SFIP, if the private flood insurance met the conditions defined further in statute at 42 U.S.C. \u00a74012a(b)(7).\nRulemaking on Accepting Private Flood Insurance\nTo fulfill the mortgage requirement, a private insurance policy must provide, among other conditions, \u201cflood insurance coverage which is at least as broad as the coverage provided under a [SFIP] ... including when considering deductibles, exclusions, and conditions offered by the insurer.\u201d Implementation of this requirement has proved challenging. The responsible federal regulators (the Federal Reserve, Farm Credit Administration, Federal Deposit Insurance Corporation, National Credit Union Administration, and Comptroller of the Currency) issued two separate Notices of Proposed Rulemaking (NPRM) addressing the issue in October 2013 and November 2016. The crux of the implementation issue can be seen as answering the question of who would judge whether specific policies met the \u201cat least as broad as\u201d standard and what criteria would be used in making this judgment. The uncertainty as to whether particular private policies would meet the standard has been seen as \u201cat odds with\u201d greater private participation in the flood insurance marketplace.\nOn February 12, 2019, the regulators announced a final rule implementing the BW-12 \u201crequirement that regulated lending institutions accept private flood insurance policies.\u201d Of particular note, the rule \n\u201callows institutions to rely on an insurer\u2019s written assurances in a private flood insurance policy stating the criteria are met; [and]\nclarifies that institutions may, under certain conditions, accept private flood insurance policies that do not meet the Biggert-Waters Act criteria.\u201d\nThe rule took effect on July 1, 2019. Press reports described it as generally welcomed by the banking industry. It does not apply directly to other federal agencies or to GSEs, which would be subject to separate rulemaking.\nCongressional Legislation\nIn past Congresses, two bills on private flood insurance have passed the House: H.R. 2874 in the 115th Congress and H.R. 2901 in the 114th Congress. Although these bills were similar, H.R. 2874 was a broader bill that would have included a longer-term reauthorization and other changes. Both bills would have revised the definition of private flood insurance previously defined in BW-12. The proposed definition would have required federal agencies to accept private flood insurance from both admitted and nonadmitted (i.e., surplus lines) insurers as long as the private insurance coverage \u201ccomplies with the laws and regulations of that State.\u201d In revising the definition, both H.R. 2901 and H.R. 2874 would have removed existing statutory language describing how private flood insurance must provide coverage \u201cas broad as\u201d that provided by the SFIP and clarified that if a property owner purchases private flood insurance and then decides to return to the NFIP, the owner would be considered to have maintained continuous coverage. Continuous coverage is required for property owners to retain any subsidies or cross-subsidies in their NFIP premium rates. A borrower may be reluctant to purchase private insurance if doing so means they would lose their subsidy should they later decide to return to NFIP coverage. In the 116th Congress, Section 401 of H.R. 3167, introduced on June 10, 2019, would consider any period during which a property is covered by a flood insurance policy, either through the NFIP or through a private company, to be a period of continuous coverage.\nOptions for Privatizing Flood Insurance\nSection 100232(a) of BW-12 required FEMA and the Government Accountability Office (GAO) to produce separate studies that \u201cassess a broad range of options, methods, and strategies for privatizing the [NFIP].\u201d In the GAO study on privatization, GAO reviewed a wide range of strategies to encourage private flood insurance. The strategies included eliminating subsidies of NFIP premium rates entirely or providing the subsidies in an explicit form not hidden in the premium; shifting the federal role to reinsuring primary flood insurance instead of directly providing it; mandating flood coverage in homeowners insurance policies; and authorizing the NFIP to issue catastrophe bonds to transfer some of the insured risk. \nThe required FEMA study on privatization discussed several key challenges that may be presented by privatizing a larger segment of NFIP policy base, including how to\nmaintain the funding of federal flood mapping and flood mitigation programs largely paid for through SFIP premiums;\nreduce and pay off the billions of dollars of debt NFIP owes to the U.S. Treasury; and\nensure the affordability and continued availability of flood insurance to property owners in flood zones. \nFor further discussion of private insurance and the NFIP, see CRS Report R45242, Private Flood Insurance and the National Flood Insurance Program.", "type": "CRS Insight", "typeId": "INSIGHTS", "active": true, "formats": [ { "format": "HTML", "encoding": "utf-8", "url": "https://www.crs.gov/Reports/IN10450", "sha1": "bfcc2b3830e7388695cd3b1d232ac91ea5590e2c", "filename": "files/20191230_IN10450_bfcc2b3830e7388695cd3b1d232ac91ea5590e2c.html", "images": {} } ], "topics": [] }, { "source": "EveryCRSReport.com", "id": 609163, "date": "2019-11-26", "retrieved": "2019-12-13T15:13:52.342661", "title": "Private Flood Insurance and the National Flood Insurance Program (NFIP)", "summary": "The National Flood Insurance Program\nThe NFIP was first authorized by the National Flood Insurance Act of 1968 (42 U.S.C. \u00a74001 et seq.) and was reauthorized until the end of FY2017 by the Biggert-Waters Flood Insurance Reform Act of 2012 (BW-12; Title II of P.L. 112-141). After a series of short-term reauthorizations, the NFIP was reauthorized until December 20, 2019 (P.L. 116-69). In statute, Congress has found that\n(1) many factors have made it uneconomic for the private insurance industry alone to make flood insurance available to those in need of such protection on reasonable terms and conditions; but \n(2) a program of flood insurance with large-scale participation of the Federal Government and carried out to the maximum extent practicable by the private insurance industry is feasible and can be initiated. (42 U.S.C. \u00a74001(b)).\nBy law or regulation, federal agencies, federally regulated lending institutions, and government-sponsored enterprises (GSEs) must require certain property owners to purchase flood insurance as a condition of any mortgage that these entities make, guarantee, or purchase. Property owners are required to purchase flood insurance if their property is identified as being in a Special Flood Hazard Area (SFHA, which is equivalent to having a 1% or greater risk of flooding every year) and is in a community that participates in the NFIP. Historically, this generally has meant that such property owners were required to purchase a Standard Flood Insurance Policy (SFIP) from the NFIP. In BW-12, Congress explicitly provided for private flood insurance to fulfill this mortgage requirement instead of the SFIP, if the private flood insurance met the conditions defined further in statute at 42 U.S.C. \u00a74012a(b)(7).\nRulemaking on Accepting Private Flood Insurance\nTo fulfill the mortgage requirement, a private insurance policy must provide, among other conditions, \u201cflood insurance coverage which is at least as broad as the coverage provided under a [SFIP] ... including when considering deductibles, exclusions, and conditions offered by the insurer.\u201d Implementation of this requirement has proved challenging. The responsible federal regulators (the Federal Reserve, Farm Credit Administration, Federal Deposit Insurance Corporation, National Credit Union Administration, and Comptroller of the Currency) have issued two separate Notices of Proposed Rulemaking (NPRM) addressing the issue in October 2013 and November 2016. The crux of the implementation issue can be seen as answering the question of who would judge whether specific policies met the \u201cat least as broad as\u201d standard and what criteria would be used in making this judgment. The uncertainty as to whether particular private policies would meet the standard has been seen as \u201cat odds with\u201d greater private participation in the flood insurance marketplace.\nOn February 12, 2019, the regulators announced a final rule implementing the BW-12 \u201crequirement that regulated lending institutions accept private flood insurance policies.\u201d Of particular note, the rule \n\u201callows institutions to rely on an insurer\u2019s written assurances in a private flood insurance policy stating the criteria are met; [and]\nclarifies that institutions may, under certain conditions, accept private flood insurance policies that do not meet the Biggert-Waters Act criteria.\u201d\nThe rule took effect on July 1, 2019. Press reports described it as generally welcomed by the banking industry. It does not apply directly to other federal agencies or to GSEs, which would be subject to separate rulemaking.\nCongressional Legislation\nIn past Congresses, two bills on private flood insurance have passed the House: H.R. 2874 in the 115th Congress and H.R. 2901 in the 114th Congress. Although these bills were similar, H.R. 2874 was a broader bill that would have included a longer-term reauthorization and other changes. Both bills would have revised the definition of private flood insurance previously defined in BW-12. The proposed definition would have required federal agencies to accept private flood insurance from both admitted and nonadmitted (i.e., surplus lines) insurers as long as the private insurance coverage \u201ccomplies with the laws and regulations of that State.\u201d In revising the definition, both H.R. 2901 and H.R. 2874 would have removed existing statutory language describing how private flood insurance must provide coverage \u201cas broad as\u201d that provided by the SFIP and clarified that if a property owner purchases private flood insurance and then decides to return to the NFIP, the owner would be considered to have maintained continuous coverage. Continuous coverage is required for property owners to retain any subsidies or cross-subsidies in their NFIP premium rates. A borrower may be reluctant to purchase private insurance if doing so means they would lose their subsidy should they later decide to return to NFIP coverage. In the 116th Congress, Section 401 of H.R. 3167, introduced on June 10, 2019, would consider any period during which a property is covered by a flood insurance policy, either through the NFIP or through a private company, to be a period of continuous coverage.\nOptions for Privatizing Flood Insurance\nSection 100232(a) of BW-12 required FEMA and GAO to produce separate studies that \u201cassess a broad range of options, methods, and strategies for privatizing the [NFIP].\u201d In the GAO study on privatization, GAO reviewed a wide range of strategies to encourage private flood insurance. The strategies included eliminating subsidies of NFIP premium rates entirely, or providing the subsidies in an explicit form not hidden in the premium; shifting the federal role to reinsuring primary flood insurance instead of directly providing it; mandating flood coverage in homeowners insurance policies; and authorizing the NFIP to issue catastrophe bonds to transfer some of the insured risk. \nThe required FEMA study on privatization discussed several key challenges that may be presented by privatizing a larger segment of NFIP policy base, including how to\nmaintain the funding of federal flood mapping and flood mitigation programs largely paid for through SFIP premiums;\nreduce and pay off the billions of dollars of debt NFIP owes to the U.S. Treasury; and\nensure the affordability and continued availability of flood insurance to property owners in flood zones. \nFor further discussion of private insurance and the NFIP, see CRS Report R45242, Private Flood Insurance and the National Flood Insurance Program.", "type": "CRS Insight", "typeId": "INSIGHTS", "active": true, "formats": [ { "format": "HTML", "encoding": "utf-8", "url": "https://www.crs.gov/Reports/IN10450", "sha1": "a3c67de95e029a373b9e1bd5fb26390b7603a90a", "filename": "files/20191126_IN10450_a3c67de95e029a373b9e1bd5fb26390b7603a90a.html", "images": {} } ], "topics": [] }, { "source": "EveryCRSReport.com", "id": 606075, "date": "2019-10-08", "retrieved": "2019-10-10T22:17:18.998190", "title": "Private Flood Insurance and the National Flood Insurance Program (NFIP)", "summary": "The National Flood Insurance Program\nThe NFIP was first authorized by the National Flood Insurance Act of 1968 (42 U.S.C. \u00a74001 et seq.) and was reauthorized until the end of FY2017 by the Biggert-Waters Flood Insurance Reform Act of 2012 (BW-12; Title II of P.L. 112-141). After a series of short-term reauthorizations, the NFIP was reauthorized until November 21, 2019 (P.L. 116-59). In statute, Congress has found that\n(1) many factors have made it uneconomic for the private insurance industry alone to make flood insurance available to those in need of such protection on reasonable terms and conditions; but \n(2) a program of flood insurance with large-scale participation of the Federal Government and carried out to the maximum extent practicable by the private insurance industry is feasible and can be initiated. (42 U.S.C. \u00a74001(b)).\nBy law or regulation, federal agencies, federally regulated lending institutions, and government-sponsored enterprises (GSEs) must require certain property owners to purchase flood insurance as a condition of any mortgage that these entities make, guarantee, or purchase. Property owners are required to purchase flood insurance if their property is identified as being in a Special Flood Hazard Area (SFHA, which is equivalent to having a 1% or greater risk of flooding every year) and is in a community that participates in the NFIP. Historically, this generally has meant that such property owners were required to purchase a Standard Flood Insurance Policy (SFIP) from the NFIP. In BW-12, Congress explicitly provided for private flood insurance to fulfill this mortgage requirement instead of the SFIP, if the private flood insurance met the conditions defined further in statute at 42 U.S.C. \u00a74012a(b)(7).\nRulemaking on Accepting Private Flood Insurance\nTo fulfill the mortgage requirement, a private insurance policy must provide, among other conditions, \u201cflood insurance coverage which is at least as broad as the coverage provided under a [SFIP] ... including when considering deductibles, exclusions, and conditions offered by the insurer.\u201d Implementation of this requirement has proved challenging. The responsible federal regulators (the Federal Reserve, Farm Credit Administration, Federal Deposit Insurance Corporation, National Credit Union Administration, and Comptroller of the Currency) have issued two separate Notices of Proposed Rulemaking (NPRM) addressing the issue in October 2013 and November 2016. The crux of the implementation issue can be seen as answering the question of who would judge whether specific policies met the \u201cat least as broad as\u201d standard and what criteria would be used in making this judgment. The uncertainty as to whether particular private policies would meet the standard has been seen as \u201cat odds with\u201d greater private participation in the flood insurance marketplace.\nOn February 12, 2019, the regulators announced a final rule implementing the BW-12 \u201crequirement that regulated lending institutions accept private flood insurance policies.\u201d Of particular note, the rule \n\u201callows institutions to rely on an insurer\u2019s written assurances in a private flood insurance policy stating the criteria are met; [and]\nclarifies that institutions may, under certain conditions, accept private flood insurance policies that do not meet the Biggert-Waters Act criteria.\u201d\nThe rule took effect on July 1, 2019. Press reports described it as generally welcomed by the banking industry. It does not apply directly to other federal agencies or to GSEs, which would be subject to separate rulemaking.\nCongressional Legislation\nIn past Congresses, two bills on private flood insurance have passed the House: H.R. 2874 in the 115th Congress and H.R. 2901 in the 114th Congress. Although these bills were similar, H.R. 2874 was a broader bill that would have included a longer-term reauthorization and other changes. Both bills would have revised the definition of private flood insurance previously defined in BW-12. The proposed definition would have required federal agencies to accept private flood insurance from both admitted and nonadmitted (i.e., surplus lines) insurers as long as the private insurance coverage \u201ccomplies with the laws and regulations of that State.\u201d In revising the definition, both H.R. 2901 and H.R. 2874 would have removed existing statutory language describing how private flood insurance must provide coverage \u201cas broad as\u201d that provided by the SFIP and clarified that if a property owner purchases private flood insurance and then decides to return to the NFIP, the owner would be considered to have maintained continuous coverage. Continuous coverage is required for property owners to retain any subsidies or cross-subsidies in their NFIP premium rates. A borrower may be reluctant to purchase private insurance if doing so means they would lose their subsidy should they later decide to return to NFIP coverage. In the 116th Congress, Section 401 of H.R. 3167, introduced on June 10, 2019, would consider any period during which a property is covered by a flood insurance policy, either through the NFIP or through a private company, to be a period of continuous coverage.\nOptions for Privatizing Flood Insurance\nSection 100232(a) of BW-12 required FEMA and GAO to produce separate studies that \u201cassess a broad range of options, methods, and strategies for privatizing the [NFIP].\u201d In the GAO study on privatization, GAO reviewed a wide range of strategies to encourage private flood insurance. The strategies included eliminating subsidies of NFIP premium rates entirely, or providing the subsidies in an explicit form not hidden in the premium; shifting the federal role to reinsuring primary flood insurance instead of directly providing it; mandating flood coverage in homeowners insurance policies; and authorizing the NFIP to issue catastrophe bonds to transfer some of the insured risk. \nThe required FEMA study on privatization discussed several key challenges that may be presented by privatizing a larger segment of NFIP policy base, including how to\nmaintain the funding of federal flood mapping and flood mitigation programs largely paid for through SFIP premiums;\nreduce and pay off the billions of dollars of debt NFIP owes to the U.S. Treasury; and\nensure the affordability and continued availability of flood insurance to property owners in flood zones. \nFor further discussion of private insurance and the NFIP, see CRS Report R45242, Private Flood Insurance and the National Flood Insurance Program.", "type": "CRS Insight", "typeId": "INSIGHTS", "active": true, "formats": [ { "format": "HTML", "encoding": "utf-8", "url": "https://www.crs.gov/Reports/IN10450", "sha1": "31f6eab9f2030a9d090cdf5aee19fd0fc99e0473", "filename": "files/20191008_IN10450_31f6eab9f2030a9d090cdf5aee19fd0fc99e0473.html", "images": {} }, { "format": "PDF", "encoding": null, "url": "https://www.crs.gov/Reports/pdf/IN10450", "sha1": "2ca6703c581c10d997537d80b6e8695527d800a0", "filename": "files/20191008_IN10450_2ca6703c581c10d997537d80b6e8695527d800a0.pdf", "images": {} } ], "topics": [] }, { "source": "EveryCRSReport.com", "id": 603309, "date": "2019-08-01", "retrieved": "2019-08-12T22:11:12.346148", "title": "Private Flood Insurance and the National Flood Insurance Program (NFIP)", "summary": "The National Flood Insurance Program\nThe NFIP was first authorized by the National Flood Insurance Act of 1968 (42 U.S.C. \u00a74001 et seq.) and was reauthorized until the end of FY2017 by the Biggert-Waters Flood Insurance Reform Act of 2012 (BW-12; Title II of P.L. 112-141). After a series of short-term reauthorizations, the NFIP was reauthorized until September 30, 2019 (P.L. 116-20). In statute, Congress has found that\n(1) many factors have made it uneconomic for the private insurance industry alone to make flood insurance available to those in need of such protection on reasonable terms and conditions; but \n(2) a program of flood insurance with large-scale participation of the Federal Government and carried out to the maximum extent practicable by the private insurance industry is feasible and can be initiated. (42 U.S.C. \u00a74001(b)).\nBy law or regulation, federal agencies, federally regulated lending institutions, and government-sponsored enterprises (GSEs) must require certain property owners to purchase flood insurance as a condition of any mortgage that these entities make, guarantee, or purchase. Property owners are required to purchase flood insurance if their property is identified as being in a Special Flood Hazard Area (SFHA, which is equivalent to having a 1% or greater risk of flooding every year) and is in a community that participates in the NFIP. Historically, this generally has meant that such property owners were required to purchase a Standard Flood Insurance Policy (SFIP) from the NFIP. In BW-12, Congress explicitly provided for private flood insurance to fulfill this mortgage requirement instead of the SFIP, if the private flood insurance met the conditions defined further in statute at 42 U.S.C. \u00a74012a(b)(7).\nRulemaking on Accepting Private Flood Insurance\nTo fulfill the mortgage requirement, a private insurance policy must provide, among other conditions, \u201cflood insurance coverage which is at least as broad as the coverage provided under a [SFIP] ... including when considering deductibles, exclusions, and conditions offered by the insurer.\u201d Implementation of this requirement has proved challenging, with the responsible federal regulators (the Federal Reserve, Farm Credit Administration, Federal Deposit Insurance Corporation, National Credit Union Administration, and Comptroller of the Currency) issuing two separate Notices of Proposed Rulemaking (NPRM) addressing the issue in October 2013 and November 2016. The crux of the implementation issue can be seen as answering the question of who would judge whether specific policies met the \u201cat least as broad as\u201d standard and what criteria would be used in making this judgment. The uncertainty as to whether particular private policies would meet the standard has been seen as \u201cat odds with\u201d greater private participation in the flood insurance marketplace.\nOn February 12, 2019, the regulators announced a final rule implementing the BW-12 \u201crequirement that regulated lending institutions accept private flood insurance policies.\u201d Of particular note, the rule \n\u201callows institutions to rely on an insurer\u2019s written assurances in a private flood insurance policy stating the criteria are met; [and]\nclarifies that institutions may, under certain conditions, accept private flood insurance policies that do not meet the Biggert-Waters Act criteria.\u201d\nThe rule took effect on July 1, 2019. Press reports described it as generally welcomed by the banking industry. It does not apply directly to other federal agencies or to GSEs, which would be subject to separate rulemaking.\nCongressional Legislation\nIn past Congresses, two bills on private flood insurance have passed the House: H.R. 2874 in the 115th Congress and H.R. 2901 in the 114th Congress. Although these bills were similar, H.R. 2874 was a broader bill that would have included a longer-term reauthorization and other changes. Both bills would have revised the definition of private flood insurance previously defined in BW-12. The proposed definition would have required federal agencies to accept private flood insurance from both admitted and nonadmitted (i.e., surplus lines) insurers as long as the private insurance coverage \u201ccomplies with the laws and regulations of that State.\u201d In revising the definition, both H.R. 2901 and H.R. 2874 would have removed existing statutory language describing how private flood insurance must provide coverage \u201cas broad as\u201d that provided by the SFIP and clarified that if a property owner purchases private flood insurance and then decides to return to the NFIP, the owner would be considered to have maintained continuous coverage. Continuous coverage is required for property owners to retain any subsidies or cross-subsidies in their NFIP premium rates. A borrower may be reluctant to purchase private insurance if doing so means they would lose their subsidy should they later decide to return to NFIP coverage. In the 116th Congress, Section 401 of H.R. 3167, introduced on June 10, 2019, would consider any period during which a property is covered by a flood insurance policy, either through the NFIP or through a private company, to be a period of continuous coverage.\nOptions for Privatizing Flood Insurance\nSection 100232(a) of BW-12 required FEMA and GAO to produce separate studies that \u201cassess a broad range of options, methods, and strategies for privatizing the [NFIP].\u201d In the GAO study on privatization, GAO reviewed a wide range of strategies to encourage private flood insurance. The strategies included eliminating subsidies of NFIP premium rates entirely, or providing the subsidies in an explicit form not hidden in the premium; shifting the federal role to reinsuring primary flood insurance instead of directly providing it; mandating flood coverage in homeowners insurance policies; and authorizing the NFIP to issue catastrophe bonds to transfer some of the insured risk. \nThe required FEMA study on privatization discussed several key challenges that may be presented by privatizing a larger segment of NFIP policy base, including how to\nmaintain the funding of federal flood mapping and flood mitigation programs largely paid for through SFIP premiums;\nreduce and pay off the billions of dollars of debt NFIP owes to the U.S. Treasury; and\nensure the affordability and continued availability of flood insurance to property owners in flood zones. \nFor further discussion of private insurance and the NFIP, see CRS Report R45242, Private Flood Insurance and the National Flood Insurance Program.", "type": "CRS Insight", "typeId": "INSIGHTS", "active": true, "formats": [ { "format": "HTML", "encoding": "utf-8", "url": "https://www.crs.gov/Reports/IN10450", "sha1": "60341ecb9c7741b232fae2f407e292e82bd87d36", "filename": "files/20190801_IN10450_60341ecb9c7741b232fae2f407e292e82bd87d36.html", "images": {} }, { "format": "PDF", "encoding": null, "url": "https://www.crs.gov/Reports/pdf/IN10450", "sha1": "a0942c865e4bf3e9835789efbd3de0d6402289b8", "filename": "files/20190801_IN10450_a0942c865e4bf3e9835789efbd3de0d6402289b8.pdf", "images": {} } ], "topics": [] }, { "source": "EveryCRSReport.com", "id": 592494, "date": "2019-02-28", "retrieved": "2019-04-17T14:11:34.330963", "title": "Private Flood Insurance and the National Flood Insurance Program (NFIP)", "summary": "The National Flood Insurance Program\nThe NFIP was first authorized by the National Flood Insurance Act of 1968 (42 U.S.C. \u00a74001 et seq.), and was reauthorized until the end of FY2017 by the Biggert-Waters Flood Insurance Reform Act of 2012 (BW-12, Title II of P.L. 112-141). After a series of short-term reauthorizations, S. 3628 in the 115th Congress reauthorized the NFIP until May 31, 2019. In statute, Congress has found that\n(1) many factors have made it uneconomic for the private insurance industry alone to make flood insurance available to those in need of such protection on reasonable terms and conditions; but \n(2) a program of flood insurance with large-scale participation of the Federal Government and carried out to the maximum extent practicable by the private insurance industry is feasible and can be initiated. (42 U.S.C. \u00a74001(b)).\nBy law or regulation, federal agencies, federally regulated lending institutions, and government-sponsored enterprises (GSEs) must require certain property owners to purchase flood insurance as a condition of any mortgage that these entities make, guarantee, or purchase. Property owners are required to purchase flood insurance if their property is identified as being in a Special Flood Hazard Area (SFHA, which is equivalent to having a 1% or greater risk of flooding every year) and is in a community that participates in the NFIP. Historically, this has generally meant that such property owners were required to purchase a Standard Flood Insurance Policy (SFIP) from the NFIP. In BW-12, Congress explicitly provided for private flood insurance to fulfill this mortgage requirement instead of the SFIP, if the private flood insurance met the conditions defined further in statute at 42 U.S.C. \u00a74012a(b)(7).\nRulemaking on Accepting Private Flood Insurance\nTo fulfill the mortgage requirement, a private insurance policy must provide, among other conditions, \u201cflood insurance coverage which is at least as broad as the coverage provided under a [SFIP] ... including when considering deductibles, exclusions, and conditions offered by the insurer.\u201d The implementation of this requirement has proved challenging, with the responsible federal regulators (the Federal Reserve, Farm Credit Administration, Federal Deposit Insurance Corporation, National Credit Union Administration, and Comptroller of the Currency) issuing two separate Notices of Proposed Rulemaking (NPRM) addressing the issue in October 2013 and November 2016. The crux of the implementation issue can be seen as answering the question of who would judge whether specific policies met the \u201cat least as broad as\u201d standard and what criteria would be used in making this judgment? The uncertainty as to whether particular private policies would meet the standard has been seen as \u201cat odds with\u201d greater private participation in the flood insurance marketplace.\nOn February 12, 2019, the regulators announced a final rule implementing the BW-12 \u201crequirement that regulated lending institutions accept private flood insurance policies.\u201d Of particular note, the rule \n\u201callows institutions to rely on an insurer\u2019s written assurances in a private flood insurance policy stating the criteria are met; [and]\nclarifies that institutions may, under certain conditions, accept private flood insurance policies that do not meet the Biggert-Waters Act criteria.\u201d\nThe rule takes effect on July 1, 2019. Press reports described it as generally welcomed by the banking industry. It does not apply directly to other federal agencies, nor to the GSEs, which would be subject to separate rulemaking.\nCongressional Legislation\nTo date, no legislation has been introduced directly addressing private flood insurance in the 116th Congress. In past Congresses, two bills have passed the House on the issue: H.R. 2874 in the 115th Congress and H.R. 2901 in the 114th Congress. Although these bills were similar, H.R. 2874 was a broader bill that would have included a longer-term reauthorization and other changes. Both bills would have revised the definition of private flood insurance previously defined in BW-12. The definition proposed would have required federal agencies to accept private flood insurance from both admitted and nonadmitted (i.e., surplus lines) insurers as long as the private insurance coverage \u201ccomplies with the laws and regulations of that State.\u201d In revising the definition, both H.R. 2901 and H.R. 2874 would also have removed existing statutory language describing how private flood insurance must provide coverage \u201cas broad as\u201d that provided by the SFIP and clarified that if a property owner purchases private flood insurance and decides then to return to the NFIP, they would be considered to have maintained continuous coverage. Continuous coverage is required for property owners to retain any subsidies or cross-subsidies in their NFIP premium rates. A borrower may be reluctant to purchase private insurance if doing so means they would lose their subsidy should they later decide to return to NFIP coverage. \nOptions for Privatizing Flood Insurance\nSection 100232(a) of BW-12 required both FEMA and the GAO to produce separate studies that \u201cassess a broad range of options, methods, and strategies for privatizing the [NFIP].\u201d In the GAO study on privatization, the GAO reviewed a wide range of strategies to encourage private flood insurance. The strategies included eliminating subsidies of NFIP premium rates entirely, or providing the subsidies in an explicit form not hidden in the premium; shifting the federal role to reinsuring primary flood insurance instead of directly providing it; mandating flood coverage in homeowners insurance policies; and authorizing the NFIP to issue catastrophe bonds to transfer some of the insured risk. \nThe required FEMA study on privatization discussed several key challenges that may be presented by privatizing a larger segment of NFIP policy base, including how to\nmaintain the funding of federal flood mapping and flood mitigation programs largely paid for through SFIP premiums;\nreduce and pay off the billions of dollars of debt NFIP owes to the U.S. Treasury; and\nensure the affordability and continued availability of flood insurance to property owners in flood zones. \nFor further discussion of the possible role of private insurance in the NFIP, see CRS Report R45242, Private Flood Insurance and the National Flood Insurance Program, by Diane P. Horn and Baird Webel.", "type": "CRS Insight", "typeId": "INSIGHTS", "active": true, "formats": [ { "format": "HTML", "encoding": "utf-8", "url": "https://www.crs.gov/Reports/IN10450", "sha1": "90ac4d04a6a8bc5a9a5700454ea12fb40ae67718", "filename": "files/20190228_IN10450_90ac4d04a6a8bc5a9a5700454ea12fb40ae67718.html", "images": {} } ], "topics": [] }, { "source": "EveryCRSReport.com", "id": 589553, "date": "2019-01-08", "retrieved": "2019-01-08T18:07:05.089735", "title": "Private Flood Insurance and the National Flood Insurance Program (NFIP)", "summary": "The National Flood Insurance Program (NFIP)\nThe NFIP was first authorized by the National Flood Insurance Act of 1968 (42 U.S.C. \u00a74001 et seq.), and was reauthorized until the end of FY2017 by the Biggert-Waters Flood Insurance Reform Act of 2012 (BW-12, Title II of P.L. 112-141). After a series of short-term reauthorizations, S. 3628 reauthorized the NFIP until May 31, 2019. In statute, Congress has found that\n(1) many factors have made it uneconomic for the private insurance industry alone to make flood insurance available to those in need of such protection on reasonable terms and conditions; but \n(2) a program of flood insurance with large-scale participation of the Federal Government and carried out to the maximum extent practicable by the private insurance industry is feasible and can be initiated. (42 U.S.C. \u00a74001(b)).\nBy law or regulation, federal agencies, federally regulated lending institutions, and government-sponsored enterprises (GSEs) must require certain property owners to purchase flood insurance as a condition of any mortgage that these entities make, guarantee, or purchase. Property owners are required to purchase flood insurance if their property is identified as being in a Special Flood Hazard Area (SFHA, which is equivalent to having a 1% or greater risk of flooding every year) and is in a community that participates in the NFIP. Historically, this has generally meant that such property owners were required to purchase a Standard Flood Insurance Policy (SFIP) from the NFIP. In BW-12, Congress explicitly allowed federal agencies to accept private flood insurance to fulfill this mortgage requirement instead of the SFIP, if the private flood insurance met the conditions defined further in statute at 42 U.S.C. \u00a74012a(b)(7).\nRulemaking on Accepting Private Flood Insurance\nTo fulfill the mortgage requirement, a private insurance policy must provide, among other conditions, \u201cflood insurance coverage which is at least as broad as the coverage provided under a [SFIP] ... including when considering deductibles, exclusions, and conditions offered by the insurer.\u201d The implementation of this requirement has proved challenging, with the responsible federal agencies issuing two separate Notices of Proposed Rulemaking (NPRM) addressing the issue in October 2013 and November 2016. The crux of the implementation issue can be seen as answering the question of who would judge whether specific policies met the \u201cat least as broad as\u201d standard and what criteria would be used in making this judgment? The uncertainty as to whether particular private policies would meet the standard has been cited as \u201cat odds with\u201d greater private participation in the flood insurance marketplace.\nLegislation in the 115th Congress\nH.R. 2874, the 21st Century Flood Reform Act, passed the House on a vote of 237 to 189 on November 14, 2017. H.R. 2874 would have revised the definition of private flood insurance previously defined in BW-12. The definition proposed would have required federal agencies to accept private flood insurance from both admitted and nonadmitted (i.e., surplus lines) insurers as long as the private insurance coverage \u201ccomplies with the laws and regulations of that State.\u201d In revising the definition, H.R. 2874 would also have removed existing statutory language describing how private flood insurance must provide coverage \u201cas broad as the coverage\u201d provided by the SFIP. In effect, this would have allowed individual states to determine most of the specifics of private flood insurance coverage accepted by federal agencies, federally regulated lending institutions, and GSEs. The dollar amount of coverage would still have had to meet federal statutory requirements and the GSEs may implement requirements relating to the financial strength of such companies offering flood insurance.\nH.R. 2874 would also have clarified that if a property owner purchases private flood insurance and decides then to return to the NFIP, they would be considered having maintained continuous coverage. Continuous coverage is required for property owners to retain any subsidies or cross-subsidies in their NFIP premium rates. A borrower may be reluctant to purchase private insurance if doing so means they would lose their subsidy should they later decide to return to NFIP coverage. The bill attempted to address that concern.\nSupporters of the legislation including, for example, the National Association of Insurance Commissioners, have suggested that a bill with similar provisions to H.R. 2874 would increase the availability of private flood insurance options for property owners. Some critics of the bill, including, for example, the Center for Economic Justice, have suggested that such provisions would allow the private market to \u201ccherry-pick\u201d (i.e., adversely select) the \u201cprofitable, lower-risk policies\u201d of the NFIP policies that are \u201coverpriced\u201d due to explicit cross-subsidization or imprecise flood insurance rate structures, while the government would retain those polices that benefit from those subsidies and imprecisions. \nOptions for Privatizing Flood Insurance\nSection 100232(a) of BW-12 required both FEMA and the GAO to produce separate studies that \u201cassess a broad range of options, methods, and strategies for privatizing the [NFIP].\u201d In the GAO study on privatization, the GAO reviewed a wide range of strategies to encourage private flood insurance. The strategies included eliminating subsidies of NFIP premium rates entirely, or providing the subsidies in an explicit form not hidden in the premium; shifting the federal role to reinsuring primary flood insurance instead of directly providing it; mandating flood coverage in homeowners insurance policies; and authorizing the NFIP to issue catastrophe bonds to transfer some of the insured risk. \nThe required FEMA study on privatization discussed several key challenges that may be presented by privatizing a larger segment of NFIP policy base, including how to\nmaintain the funding of federal flood mapping and flood mitigation programs largely paid for through SFIP premiums;\nreduce and pay off the billions of dollars of debt NFIP owes to the U.S. Treasury; and\nensure the affordability and continued availability of flood insurance to property owners in flood zones. \nFor further discussion of the possible role of private insurance in the NFIP, see CRS Report R45242, Private Flood Insurance and the National Flood Insurance Program, by Diane P. Horn and Baird Webel.", "type": "CRS Insight", "typeId": "INSIGHTS", "active": true, "formats": [ { "format": "HTML", "encoding": "utf-8", "url": "http://www.crs.gov/Reports/IN10450", "sha1": "8fcdf454725d2cf563b07b424587c1ca5528ff5a", "filename": "files/20190108_IN10450_8fcdf454725d2cf563b07b424587c1ca5528ff5a.html", "images": {} } ], "topics": [] }, { "source": "EveryCRSReport.com", "id": 583514, "date": "2018-07-31", "retrieved": "2018-08-07T13:40:23.312460", "title": "Private Flood Insurance and the National Flood Insurance Program (NFIP)", "summary": "The National Flood Insurance Program (NFIP)\nThe NFIP was first authorized by the National Flood Insurance Act of 1968 (42 U.S.C. \u00a7\u00a74001 et seq.), and was reauthorized until the end of FY2017 by the Biggert-Waters Flood Insurance Reform Act of 2012 (BW-12, Title II of P.L. 112-141). After a series of short-term reauthorizations, P.L. 115-225 reauthorized the NFIP until November 30, 2018. In statute, Congress has found that\n(1) many factors have made it uneconomic for the private insurance industry alone to make flood insurance available to those in need of such protection on reasonable terms and conditions; but \n(2) a program of flood insurance with large-scale participation of the Federal Government and carried out to the maximum extent practicable by the private insurance industry is feasible and can be initiated. (42 U.S.C. \u00a74001(b))\nBy law or regulation, federal agencies, federally regulated lending institutions, and government-sponsored enterprises (GSEs) must require certain property owners to purchase flood insurance as a condition of any mortgage that these entities make, guarantee, or purchase. Property owners are required to purchase flood insurance if their property is identified as being in a Special Flood Hazard Area (SFHA, which is equivalent to having a 1% or greater risk of flooding every year) and is in a community that participates in the NFIP. Historically, this has generally meant that such property owners were required to purchase a Standard Flood Insurance Policy (SFIP) from the NFIP. In BW-12, Congress explicitly allowed federal agencies to accept private flood insurance to fulfill this mortgage requirement instead of the SFIP, if the private flood insurance met the conditions defined further in statute at 42 U.S.C. 4012a(b)(7).\nRulemaking on Accepting Private Flood Insurance\nTo fulfill the mortgage requirement, a private insurance policy must provide, among other conditions, \u201cflood insurance coverage which is at least as broad as the coverage provided under a [SFIP] ... including when considering deductibles, exclusions, and conditions offered by the insurer.\u201d The implementation of this requirement has proved challenging, with the responsible federal agencies issuing two separate Notices of Proposed Rulemaking (NPRM) addressing the issue in October 2013 and November 2016. The crux of the implementation issue can be seen as answering the question of who would judge whether specific policies met the \u201cat least as broad as\u201d standard and what criteria would be used in making this judgment? The uncertainty as to whether particular private policies would meet the standard has been cited as \u201cat odds with\u201d greater private participation in the flood insurance marketplace.\nLegislation in the 115th Congress\nH.R. 2874, the 21st Century Flood Reform Act, passed the House on a vote of 237 to 189 on November 14, 2017. H.R. 2874 would revise the definition of private flood insurance previously defined in BW-12. The definition proposed would require federal agencies to accept private flood insurance from both admitted and nonadmitted (i.e., surplus lines) insurers as long as the private insurance coverage \u201ccomplies with the laws and regulations of that State.\u201d In revising the definition, H.R. 2874 would also strike existing statutory language describing how private flood insurance must provide coverage \u201cas broad as the coverage\u201d provided by the SFIP. In effect, this would allow individual states to determine most of the specifics of private flood insurance coverage accepted by federal agencies, federally regulated lending institutions, and GSEs. The dollar amount of coverage would still have to meet federal statutory requirements and the GSEs may implement requirements relating to the financial strength of such companies offering flood insurance.\nH.R. 2874 would clarify that if a property owner purchases private flood insurance and decides then to return to the NFIP, they would be considered having maintained continuous coverage. Continuous coverage is required for property owners to retain any subsidies or cross-subsidies in their NFIP premium rates. A borrower may be reluctant to purchase private insurance if doing so means they would lose their subsidy should they later decide to return to NFIP coverage. The bill attempts to address that concern.\nSupporters of the legislation including, for example, the National Association of Insurance Commissioners, have suggested that it will increase the availability of private flood insurance options for property owners. Some critics of the bill, including, for example, the Center for Economic Justice, have suggested that H.R. 2874 will allow the private market to \u201ccherry-pick\u201d (i.e., adversely select) the \u201cprofitable, lower-risk policies\u201d of the NFIP policies that are \u201coverpriced\u201d due to explicit cross-subsidization or imprecise flood insurance rate structures, while the government would retain those polices that benefit from those subsidies and imprecisions. \nOptions for Privatizing Flood Insurance\nSection 100232(a) of BW-12 required both FEMA and the GAO to produce separate studies that \u201cassess a broad range of options, methods, and strategies for privatizing the [NFIP].\u201d In the GAO study on privatization, the GAO reviewed a wide range of strategies to encourage private flood insurance. The strategies included eliminating subsidies of NFIP premium rates entirely, or providing the subsidies in an explicit form not hidden in the premium; shifting the federal role to reinsuring primary flood insurance instead of directly providing it; mandating flood coverage in homeowners insurance policies; and authorizing the NFIP to issue catastrophe bonds to transfer some of the insured risk. \nThe required FEMA study on privatization discussed several key challenges that may be presented by privatizing a larger segment of NFIP policy base, including how to\nmaintain the funding of federal flood mapping and flood mitigation programs largely paid for through SFIP premiums;\nreduce and pay off the billions of dollars of debt NFIP owes to the U.S. Treasury; and\nensure the affordability and continued availability of flood insurance to property owners in flood zones. \nFor further discussion of the possible role of private insurance in the NFIP, see CRS Report R45099, National Flood Insurance Program: Selected Issues and Legislation in the 115th Congress.", "type": "CRS Insight", "typeId": "INSIGHTS", "active": true, "formats": [ { "format": "HTML", "encoding": "utf-8", "url": "http://www.crs.gov/Reports/IN10450", "sha1": "a75b7728a7163b846a980444f46f62e265802910", "filename": "files/20180731_IN10450_a75b7728a7163b846a980444f46f62e265802910.html", "images": {} } ], "topics": [] }, { "source": "EveryCRSReport.com", "id": 580180, "date": "2018-04-16", "retrieved": "2018-05-10T10:38:04.030340", "title": "Private Flood Insurance and the National Flood Insurance Program (NFIP)", "summary": "The National Flood Insurance Program (NFIP)\nThe NFIP was first authorized by the National Flood Insurance Act of 1968 (42 U.S.C. \u00a7\u00a74001 et seq.), and was reauthorized until the end of FY2017 by the Biggert-Waters Flood Insurance Reform Act of 2012 (BW-12, Title II of P.L. 112-141). After a series of short-term reauthorizations, P.L. 115-141 reauthorized the NFIP until July 31, 2018. In statute, Congress has found that\n(1) many factors have made it uneconomic for the private insurance industry alone to make flood insurance available to those in need of such protection on reasonable terms and conditions; but \n(2) a program of flood insurance with large-scale participation of the Federal Government and carried out to the maximum extent practicable by the private insurance industry is feasible and can be initiated. (42 U.S.C. \u00a74001(b))\nBy law or regulation, federal agencies, federally regulated lending institutions, and government-sponsored enterprises (GSEs) must require certain property owners to purchase flood insurance as a condition of any mortgage that these entities make, guarantee, or purchase. Property owners are required to purchase flood insurance if their property is identified as being in a Special Flood Hazard Area (SFHA, which is equivalent to having a 1% or greater risk of flooding every year) and is in a community that participates in the NFIP. Historically, this has generally meant that such property owners were required to purchase a Standard Flood Insurance Policy (SFIP) from the NFIP. In BW-12, Congress explicitly allowed federal agencies to accept private flood insurance to fulfill this mortgage requirement instead of the SFIP, if the private flood insurance met the conditions defined further in statute at 42 U.S.C. 4012a(b)(7).\nRulemaking on Accepting Private Flood Insurance\nTo fulfill the mortgage requirement, a private insurance policy must provide, among other conditions, \u201cflood insurance coverage which is at least as broad as the coverage provided under a [SFIP] ... including when considering deductibles, exclusions, and conditions offered by the insurer.\u201d The implementation of this requirement has proved challenging, with the responsible federal agencies issuing two separate Notices of Proposed Rulemaking (NPRM) addressing the issue in October 2013 and November 2016. The crux of the implementation issue can be seen as answering the question of who would judge whether specific policies met the \u201cat least as broad as\u201d standard and what criteria would be used in making this judgment? The uncertainty as to whether particular private policies would meet the standard has been cited as \u201cat odds with\u201d greater private participation in the flood insurance marketplace.\nLegislation in the 115th Congress\nH.R. 2874, the 21st Century Flood Reform Act, passed the House on a vote of 237 to 189 on November 14, 2017. H.R. 2874 would revise the definition of private flood insurance previously defined in BW-12. The definition proposed would require federal agencies to accept private flood insurance from both admitted and non-admitted (i.e., surplus lines) insurers as long as the private insurance coverage \u201ccomplies with the laws and regulations of that State.\u201d In revising the definition, H.R. 2874 would also strike existing statutory language describing how private flood insurance must provide coverage \u201cas broad as the coverage\u201d provided by the SFIP. In effect, this would allow individual states to determine most of the specifics of private flood insurance coverage accepted by federal agencies, federally regulated lending institutions, and GSEs. The dollar amount of coverage would still have to meet federal statutory requirements and the GSEs may implement requirements relating to the financial strength of such companies offering flood insurance.\nH.R. 2874 would clarify that if a property owner purchases private flood insurance and decides then to return to the NFIP, they would be considered having maintained continuous coverage. Continuous coverage is required for property owners to retain any subsidies or cross-subsidies in their NFIP premium rates. A borrower may be reluctant to purchase private insurance if doing so means they would lose their subsidy should they later decide to return to NFIP coverage. The bill attempts to address that concern.\nSupporters of the legislation including, for example, the National Association of Insurance Commissioners, have suggested that it will increase the availability of private flood insurance options for property owners. Some critics of the bill, including, for example, the Center for Economic Justice, have suggested that H.R. 2874 will allow the private market to \u201ccherry-pick\u201d (i.e., adversely select) the \u201cprofitable, lower-risk policies\u201d of the NFIP policies that are \u201coverpriced\u201d due to explicit cross-subsidization or imprecise flood insurance rate structures, while the government would retain those polices that benefit from those subsidies and imprecisions. \nOptions for Privatizing Flood Insurance\nSection 100232(a) of BW-12 required both FEMA and the GAO to produce separate studies that \u201cassess a broad range of options, methods, and strategies for privatizing the [NFIP].\u201d In the GAO study on privatization, the GAO reviewed a wide range of strategies to encourage private flood insurance. The strategies included eliminating subsidies of NFIP premium rates entirely, or providing the subsidies in an explicit form not hidden in the premium; shifting the federal role to reinsuring primary flood insurance instead of directly providing it; mandating flood coverage in homeowners insurance policies; and authorizing the NFIP to issue catastrophe bonds to transfer some of the insured risk. \nThe required FEMA study on privatization discussed several key challenges that may be presented by privatizing a larger segment of NFIP policy base, including how to\nmaintain the funding of federal flood mapping and flood mitigation programs largely paid for through SFIP premiums;\nreduce and pay off the billions of dollars of debt NFIP owes to the U.S. Treasury; and\nensure the affordability and continued availability of flood insurance to property owners in flood zones. \nFor further discussion of the possible role of private insurance in the NFIP, see CRS Report R45099, National Flood Insurance Program: Selected Issues and Legislation in the 115th Congress.", "type": "CRS Insight", "typeId": "INSIGHTS", "active": true, "formats": [ { "format": "HTML", "encoding": "utf-8", "url": "http://www.crs.gov/Reports/IN10450", "sha1": "eb688f3156243ce974b8538085209c7fa7b9af7b", "filename": "files/20180416_IN10450_eb688f3156243ce974b8538085209c7fa7b9af7b.html", "images": {} } ], "topics": [] }, { "source": "EveryCRSReport.com", "id": 578857, "date": "2018-03-05", "retrieved": "2018-03-09T00:02:37.833495", "title": "Private Flood Insurance and the National Flood Insurance Program (NFIP)", "summary": "The National Flood Insurance Program (NFIP)\nThe NFIP was first authorized by the National Flood Insurance Act of 1968 (42 U.S.C. \u00a7\u00a74001 et seq.), and was reauthorized until the end of FY2017 by the Biggert-Waters Flood Insurance Reform Act of 2012 (BW-12, Title II of P.L. 112-141). After a series of short-term reauthorizations, P.L. 115-123 reauthorized the NFIP until March 23, 2018. In statute, Congress has found that\n(1) many factors have made it uneconomic for the private insurance industry alone to make flood insurance available to those in need of such protection on reasonable terms and conditions; but \n(2) a program of flood insurance with large-scale participation of the Federal Government and carried out to the maximum extent practicable by the private insurance industry is feasible and can be initiated. (42 U.S.C. \u00a74001(b))\nBy law or regulation, federal agencies, federally regulated lending institutions, and government-sponsored enterprises (GSEs) must require certain property owners to purchase flood insurance as a condition of any mortgage that these entities make, guarantee, or purchase. Property owners are required to purchase flood insurance if their property is identified as being in a Special Flood Hazard Area (SFHA, which is equivalent to having a 1% or greater risk of flooding every year) and is in a community that participates in the NFIP. Historically, this has generally meant that such property owners were required to purchase a Standard Flood Insurance Policy (SFIP) from the NFIP. In BW-12, Congress explicitly allowed federal agencies to accept private flood insurance to fulfill this mortgage requirement instead of the SFIP, if the private flood insurance met the conditions defined further in statute at 42 U.S.C. 4012a(b)(7).\nRulemaking on Accepting Private Flood Insurance\nTo fulfill the mortgage requirement, a private insurance policy must provide, among other conditions, \u201cflood insurance coverage which is at least as broad as the coverage provided under a [SFIP] ... including when considering deductibles, exclusions, and conditions offered by the insurer.\u201d The implementation of this requirement has proved challenging, with the responsible federal agencies issuing two separate Notices of Proposed Rulemaking (NPRM) addressing the issue in October 2013 and November 2016. The crux of the implementation issue can be seen as answering the question of who would judge whether specific policies met the \u201cat least as broad as\u201d standard and what criteria would be used in making this judgment? The uncertainty as to whether particular private policies would meet the standard has been cited as \u201cat odds with\u201d greater private participation in the flood insurance marketplace.\nLegislation in the 115th Congress\nH.R. 2874, the 21st Century Flood Reform Act, passed the House on a vote of 237 to 189 on November 14, 2017. H.R. 2874 would revise the definition of private flood insurance previously defined in BW-12. The definition proposed would require federal agencies to accept private flood insurance from both admitted and non-admitted (i.e., surplus lines) insurers as long as the private insurance coverage \u201ccomplies with the laws and regulations of that State.\u201d In revising the definition, H.R. 2874 would also strike existing statutory language describing how private flood insurance must provide coverage \u201cas broad as the coverage\u201d provided by the SFIP. In effect, this would allow individual states to determine most of the specifics of private flood insurance coverage accepted by federal agencies, federally regulated lending institutions, and GSEs. The dollar amount of coverage would still have to meet federal statutory requirements and the GSEs may implement requirements relating to the financial strength of such companies offering flood insurance.\nH.R. 2874 would clarify that if a property owner purchases private flood insurance and decides then to return to the NFIP, they would be considered having maintained continuous coverage. Continuous coverage is required for property owners to retain any subsidies or cross-subsidies in their NFIP premium rates. A borrower may be reluctant to purchase private insurance if doing so means they would lose their subsidy should they later decide to return to NFIP coverage. The bill attempts to address that concern.\nSupporters of the legislation including, for example, the National Association of Insurance Commissioners, have suggested that it will increase the availability of private flood insurance options for property owners. Some critics of the bill, including, for example, the Center for Economic Justice, have suggested that H.R. 2874 will allow the private market to \u201ccherry-pick\u201d (i.e., adversely select) the \u201cprofitable, lower-risk policies\u201d of the NFIP policies that are \u201coverpriced\u201d due to explicit cross-subsidization or imprecise flood insurance rate structures, while the government would retain those polices that benefit from those subsidies and imprecisions. \nOptions for Privatizing Flood Insurance\nSection 100232(a) of BW-12 required both FEMA and the GAO to produce separate studies that \u201cassess a broad range of options, methods, and strategies for privatizing the [NFIP].\u201d In the GAO study on privatization, the GAO reviewed a wide range of strategies to encourage private flood insurance. The strategies included eliminating subsidies of NFIP premium rates entirely, or providing the subsidies in an explicit form not hidden in the premium; shifting the federal role to reinsuring primary flood insurance instead of directly providing it; mandating flood coverage in homeowners insurance policies; and authorizing the NFIP to issue catastrophe bonds to transfer some of the insured risk. \nThe required FEMA study on privatization discussed several key challenges that may be presented by privatizing a larger segment of NFIP policy base, including how to\nmaintain the funding of federal flood mapping and flood mitigation programs largely paid for through SFIP premiums;\nreduce and pay off the billions of dollars of debt NFIP owes to the U.S. Treasury; and\nensure the affordability and continued availability of flood insurance to property owners in flood zones. \nFor further discussion of the possible role of private insurance in the NFIP, see CRS Report R45099, National Flood Insurance Program: Selected Issues and Legislation in the 115th Congress.", "type": "CRS Insight", "typeId": "INSIGHTS", "active": true, "formats": [ { "format": "HTML", "encoding": "utf-8", "url": "http://www.crs.gov/Reports/IN10450", "sha1": "60b7fe973f4246c7cb6ca84e1459087669d2ebf9", "filename": "files/20180305_IN10450_60b7fe973f4246c7cb6ca84e1459087669d2ebf9.html", "images": {} } ], "topics": [] }, { "source": "EveryCRSReport.com", "id": 577359, "date": "2018-01-03", "retrieved": "2018-01-05T14:21:24.764162", "title": "Private Flood Insurance and the National Flood Insurance Program (NFIP)", "summary": "The National Flood Insurance Program (NFIP)\nThe NFIP was first authorized by the National Flood Insurance Act of 1968 (42 U.S.C. \u00a7\u00a74001 et seq), and was reauthorized until the end of FY2017 by the Biggert-Waters Flood Insurance Reform Act of 2012 (BW-12, Title II of P.L. 112-141). P.L. 115-96 reauthorized it until January 19, 2018. In statute, Congress has found that\n(1) many factors have made it uneconomic for the private insurance industry alone to make flood insurance available to those in need of such protection on reasonable terms and conditions; but \n(2) a program of flood insurance with large-scale participation of the Federal Government and carried out to the maximum extent practicable by the private insurance industry is feasible and can be initiated. (42 U.S.C. \u00a74001(b))\nBy law or regulation, federal agencies, federally regulated lending institutions, and government-sponsored enterprises (GSEs) must require certain property owners to purchase flood insurance as a condition of any mortgage that these entities make, guarantee, or purchase. Property owners are required to purchase flood insurance if their property is identified as being in a Special Flood Hazard Area (SFHA, which is equivalent to having a 1% or greater risk of flooding every year) and is in a community that participates in the NFIP. Historically, this has generally meant that such property owners were required to purchase a Standard Flood Insurance Policy (SFIP) from the NFIP. In BW-12, Congress explicitly allowed federal agencies to accept private flood insurance to fulfill this mortgage requirement instead of the SFIP, if the private flood insurance met the conditions defined further in statute at 42 U.S.C. 4012a(b)(7).\nRulemaking on Accepting Private Flood Insurance\nTo fulfill the mortgage requirement, a private insurance policy must provide, among other conditions, \u201cflood insurance coverage which is at least as broad as the coverage provided under a [SFIP] ... including when considering deductibles, exclusions, and conditions offered by the insurer.\u201d The implementation of this requirement has proved challenging, with the responsible federal agencies issuing two separate Notices of Proposed Rulemaking (NPRM) addressing the issue in October 2013 and November 2016. The crux of the implementation issue can be seen as answering the question of who would judge whether specific policies met the \u201cat least as broad as\u201d standard and what criteria would be used in making this judgment? The uncertainty as to whether particular private policies would meet the standard has been cited as \u201cat odds with\u201d greater private participation in the flood insurance marketplace.\nLegislation in the 115th Congress\nThe Flood Insurance Market Parity and Modernization Act of 2017 (H.R. 1422/S. 563) was introduced on March 8, 2017. It was reported by the House Committee on Financial Services and then included in Section 201 of H.R. 2874 as it came to the House floor under H.Res. 616. H.R. 2874 passed the House on a vote of 237 to 189 on November 14, 2017.\nH.R. 2874 would revise the definition of private flood insurance previously defined in BW-12. The definition proposed would require federal agencies to accept private flood insurance from both admitted and non-admitted (i.e., surplus lines) insurers as long as the private insurance coverage \u201ccomplies with the laws and regulations of that State.\u201d In revising the definition, H.R. 2874 would also strike existing statutory language describing how private flood insurance must provide coverage \u201cas broad as the coverage\u201d provided by the SFIP. In effect, this would allow individual states to determine most of the specifics of private flood insurance coverage accepted by federal agencies, federally regulated lending institutions, and GSEs. The dollar amount of coverage would still have to meet federal statutory requirements and the GSEs may implement requirements relating to the financial strength of such companies offering flood insurance.\nH.R. 2874 would clarify that if a property owner purchases private flood insurance and decides then to return to the NFIP, they would be considered having maintained continuous coverage. Continuous coverage is required for property owners to retain any subsidies or cross-subsidies in their NFIP premium rates. A borrower may be reluctant to purchase private insurance if doing so means they would lose their subsidy should they later decide to return to NFIP coverage. The bills attempt to address that concern.\nSupporters of the legislation including, for example, the National Association of Insurance Commissioners, have suggested that it will increase the availability of private flood insurance options for property owners. Some critics of the bill, including, for example, the Center for Economic Justice, have suggested that H.R. 2874 will allow the private market to \u201ccherry-pick\u201d (i.e., adversely select) the \u201cprofitable, lower-risk policies\u201d of the NFIP policies that are \u201coverpriced\u201d due to explicit cross-subsidization or imprecise flood insurance rate structures, while the government would retain those polices that benefit from those subsidies and imprecisions. \nOptions for Privatizing Flood Insurance\nSection 100232(a) of BW-12 required both FEMA and the GAO to produce separate studies that \u201cassess a broad range of options, methods, and strategies for privatizing the [NFIP].\u201d In the GAO study on privatization, the GAO reviewed a wide range of alternative strategies to encourage private flood insurance. The strategies included eliminating subsidies of NFIP premium rates entirely, or providing the subsidies in an explicit form not hidden in the premium; shifting the federal role to reinsuring primary flood insurance instead of directly providing it; mandating flood coverage in homeowners insurance policies; and authorizing the NFIP to issue catastrophe bonds to transfer some of the insured risk. \nThe required FEMA study on privatization discussed several key challenges that may be presented by privatizing a larger segment of NFIP policy base, including how to\nmaintain the funding of federal flood mapping and flood mitigation programs largely paid for through SFIP premiums;\nreduce and pay off the billions of dollars of debt NFIP owes to the U.S. Treasury; and\nensure the affordability and continued availability of flood insurance to property owners in flood zones.", "type": "CRS Insight", "typeId": "INSIGHTS", "active": true, "formats": [ { "format": "HTML", "encoding": "utf-8", "url": "http://www.crs.gov/Reports/IN10450", "sha1": "9351b7a036714720d2ecd39adc2ecca75ae3d89e", "filename": "files/20180103_IN10450_9351b7a036714720d2ecd39adc2ecca75ae3d89e.html", "images": {} } ], "topics": [] }, { "source": "EveryCRSReport.com", "id": 575600, "date": "2017-11-17", "retrieved": "2017-11-28T14:37:47.229246", "title": "Private Flood Insurance and the National Flood Insurance Program (NFIP)", "summary": "The National Flood Insurance Program (NFIP)\nThe NFIP was first authorized by the National Flood Insurance Act of 1968 (42 U.S.C. \u00a7\u00a74001 et seq), and was reauthorized until the end of FY2017 by the Biggert-Waters Flood Insurance Reform Act of 2012 (BW-12, Title II of P.L. 112-141). P.L. 115-56 reauthorized it until December 8, 2017. In statute, Congress has found that\n(1) many factors have made it uneconomic for the private insurance industry alone to make flood insurance available to those in need of such protection on reasonable terms and conditions; but \n(2) a program of flood insurance with large-scale participation of the Federal Government and carried out to the maximum extent practicable by the private insurance industry is feasible and can be initiated. (42 U.S.C. \u00a74001(b))\nBy law or regulation, federal agencies, federally regulated lending institutions, and government-sponsored enterprises (GSEs) must require certain property owners to purchase flood insurance as a condition of any mortgage that these entities make, guarantee, or purchase. Property owners are required to purchase flood insurance if their property is identified as being in a Special Flood Hazard Area (SFHA, which is equivalent to having a 1% or greater risk of flooding every year) and is in a community that participates in the NFIP. Historically, this has generally meant that such property owners were required to purchase a Standard Flood Insurance Policy (SFIP) from the NFIP. In BW-12, Congress explicitly allowed federal agencies to accept private flood insurance to fulfill this mortgage requirement instead of the SFIP, if the private flood insurance met the conditions defined further in statute at 42 U.S.C. 4012a(b)(7).\nRulemaking on Accepting Private Flood Insurance\nTo fulfill the mortgage requirement, a private insurance policy must provide, among other conditions, \u201cflood insurance coverage which is at least as broad as the coverage provided under a [SFIP] ... including when considering deductibles, exclusions, and conditions offered by the insurer.\u201d The implementation of this requirement has proved challenging, with the responsible federal agencies issuing two separate Notices of Proposed Rulemaking (NPRM) addressing the issue in October 2013 and November 2016. The crux of the implementation issue can be seen as answering the question of who would judge whether specific policies met the \u201cat least as broad as\u201d standard and what criteria would be used in making this judgment? The uncertainty as to whether particular private policies would meet the standard has been cited as \u201cat odds with\u201d greater private participation in the flood insurance marketplace.\nLegislation in the 115th Congress\nThe Flood Insurance Market Parity and Modernization Act of 2017 (H.R. 1422/S. 563) was introduced on March 8, 2017. It was reported by the House Committee on Financial Services and then included in Section 201 of H.R. 2874 as it came to the House floor under H.Res. 616. H.R. 2874 passed the House on a vote of 237 to 189 on November 14, 2017.\nH.R. 2874/H.R. 1422/S. 563 would revise the definition of private flood insurance previously defined in BW-12. The definition proposed would require federal agencies to accept private flood insurance from both admitted and non-admitted (i.e., surplus lines) insurers as long as the private insurance coverage \u201ccomplies with the laws and regulations of that State.\u201d In revising the definition, H.R. 2874/H.R. 1422/S. 563 would also strike existing statutory language describing how private flood insurance must provide coverage \u201cas broad as the coverage\u201d provided by the SFIP. In effect, this would allow individual states to determine most of the specifics of private flood insurance coverage accepted by federal agencies, federally regulated lending institutions, and GSEs. The dollar amount of coverage would still have to meet federal statutory requirements and the GSEs may implement requirements relating to the financial strength of such companies offering flood insurance.\nH.R. 2874/H.R. 1422/S. 563 would clarify that if a property owner purchases private flood insurance and decides then to return to the NFIP, they would be considered having maintained continuous coverage. Continuous coverage is required for property owners to retain any subsidies or cross-subsidies in their NFIP premium rates. A borrower may be reluctant to purchase private insurance if doing so means they would lose their subsidy should they later decide to return to NFIP coverage. The bills attempt to address that concern.\nSupporters of the legislation including, for example, the National Association of Insurance Commissioners, have suggested that it will increase the availability of private flood insurance options for property owners. Some critics of the bill, including, for example, the Center for Economic Justice, have suggested that H.R. 2874/H.R. 1422/S. 563 will allow the private market to \u201ccherry-pick\u201d (i.e., adversely select) the \u201cprofitable, lower-risk policies\u201d of the NFIP policies that are \u201coverpriced\u201d due to explicit cross-subsidization or imprecise flood insurance rate structures, while the government would retain those polices that benefit from those subsidies and imprecisions. \nOptions for Privatizing Flood Insurance\nSection 100232(a) of BW-12 required both FEMA and the GAO to produce separate studies that \u201cassess a broad range of options, methods, and strategies for privatizing the [NFIP].\u201d In the GAO study on privatization, the GAO reviewed a wide range of alternative strategies to encourage private flood insurance. The strategies included eliminating subsidies of NFIP premium rates entirely, or providing the subsidies in an explicit form not hidden in the premium; shifting the federal role to reinsuring primary flood insurance instead of directly providing it; mandating flood coverage in homeowners insurance policies; and authorizing the NFIP to issue catastrophe bonds to transfer some of the insured risk. \nThe required FEMA study on privatization discussed several key challenges that may be presented by privatizing a larger segment of NFIP policy base, including how to\nmaintain the funding of federal flood mapping and flood mitigation programs largely paid for through SFIP premiums;\nreduce and pay off the billions of dollars of debt NFIP owes to the U.S. Treasury; and\nensure the affordability and continued availability of flood insurance to property owners in flood zones.", "type": "CRS Insight", "typeId": "INSIGHTS", "active": true, "formats": [ { "format": "HTML", "encoding": "utf-8", "url": "http://www.crs.gov/Reports/IN10450", "sha1": "24fadd7a233a115b8c433fcfea2c4f03bd0b8ef3", "filename": "files/20171117_IN10450_24fadd7a233a115b8c433fcfea2c4f03bd0b8ef3.html", "images": {} } ], "topics": [] }, { "source": "EveryCRSReport.com", "id": 461619, "date": "2017-06-02", "retrieved": "2017-06-07T15:29:58.175114", "title": "Private Flood Insurance and the National Flood Insurance Program (NFIP)", "summary": "The National Flood Insurance Program (NFIP)\nThe NFIP was first authorized by the National Flood Insurance Act of 1968 (42 U.S.C. \u00a7\u00a74001 et seq), and was reauthorized until the end of FY2017 by the Biggert-Waters Flood Insurance Reform Act of 2012 (BW-12, Title II of P.L. 112-141). In statute, Congress has found that\n(1) many factors have made it uneconomic for the private insurance industry alone to make flood insurance available to those in need of such protection on reasonable terms and conditions; but \n(2) a program of flood insurance with large-scale participation of the Federal Government and carried out to the maximum extent practicable by the private insurance industry is feasible and can be initiated. (42 U.S.C. \u00a74001(b))\nBy law or regulation, federal agencies, federally regulated lending institutions, and government-sponsored enterprises (GSEs) must require certain property owners to purchase flood insurance as a condition of any mortgage that these entities make, guarantee, or purchase. Property owners are required to purchase flood insurance if their property is identified as being in a Special Flood Hazard Area (SFHA, which is equivalent to having a 1% or greater risk of flooding every year) and is in a community that participates in the NFIP. Historically, this has generally meant that such property owners were required to purchase a Standard Flood Insurance Policy (SFIP) from the NFIP. In BW-12, Congress explicitly allowed federal agencies to accept private flood insurance to fulfill this mortgage requirement instead of the SFIP, if the private flood insurance met the conditions defined further in statute at 42 U.S.C. 4012a(b)(7).\nRulemaking on Accepting Private Flood Insurance\nTo fulfill the mortgage requirement, a private insurance policy must provide, among other conditions, \u201cflood insurance coverage which is at least as broad as the coverage provided under a [SFIP] ... including when considering deductibles, exclusions, and conditions offered by the insurer.\u201d The implementation of this requirement has proved challenging, with the responsible federal agencies issuing two separate Notices of Proposed Rulemaking (NPRM) addressing the issue in October 2013 and November 2016. The crux of the implementation issue can be seen as answering the question of who would judge whether specific policies met the \u201cat least as broad as\u201d standard and what criteria would be used in making this judgment? The uncertainty as to whether particular private policies would meet the standard has been cited as \u201cat odds with\u201d greater private participation in the flood insurance marketplace.\nLegislation in the 115th Congress\nThe Flood Insurance Market Parity and Modernization Act (H.R. 1422/S. 563) was introduced on March 8, 2017. The bills are identical to 114th Congress legislation (H.R. 2901) as amended in committee and passed by the House on a vote of 419-0. The Senate did not act on this bill or on the unamended Senate companion prior to the end of the 114th Congress.\nH.R. 1422/S. 563 would revise the definition of private flood insurance previously defined in BW-12. The definition proposed would require federal agencies to accept private flood insurance from both admitted and non-admitted (i.e., surplus lines) insurers as long as the private insurance coverage \u201ccomplies with the laws and regulations of that State.\u201d In revising the definition, H.R. 1422/S. 563 would also strike existing statutory language describing how private flood insurance must provide coverage \u201cas broad as the coverage\u201d provided by the SFIP. In effect, this would allow individual states to determine most of the specifics of private flood insurance coverage accepted by federal agencies, federally regulated lending institutions, and GSEs. The dollar amount of coverage would still have to meet federal statutory requirements and the GSEs may implement requirements relating to the financial strength of such companies offering flood insurance.\nH.R. 1422/S. 563 would clarify that if a property owner purchases private flood insurance and decides then to return to the NFIP, they would be considered having maintained continuous coverage. Continuous coverage is required for property owners to retain any subsidies or cross-subsidies in their NFIP premium rates. A borrower may be reluctant to purchase private insurance if doing so means they would lose their subsidy should they later decide to return to NFIP coverage. The bills attempt to address that concern..\nSupporters of H.R. 1422/S. 563, including, for example, the National Association of Insurance Commissioners, have suggested that it will increase the availability of private flood insurance options for property owners. Some critics of the bill, including, for example, the Center for Economic Justice, have suggested that H.R. 1422/S. 563 will allow the private market to \u201ccherry-pick\u201d (i.e., adversely select) the \u201cprofitable, lower-risk policies\u201d of the NFIP policies of that are \u201coverpriced\u201d due to explicit cross-subsidization or imprecise flood insurance rate structures, while the government would retain those polices that benefit from those subsidies and imprecisions. \nOptions for Privatizing Flood Insurance\nSection 100232(a) of BW-12 required both FEMA and the GAO to produce separate studies that \u201cassess a broad range of options, methods, and strategies for privatizing the [NFIP].\u201d In the GAO study on privatization, the GAO reviewed a wide range of alternative strategies to encourage private flood insurance. The strategies included eliminating subsidies of NFIP premium rates entirely, or providing the subsidies in an explicit form not hidden in the premium; shifting the federal role to reinsuring primary flood insurance instead of directly providing it; mandating flood coverage in homeowners insurance policies; and authorizing the NFIP to issue catastrophe bonds to transfer some of the insured risk. \nThe required FEMA study on privatization discussed several key challenges that may be presented by privatizing a larger segment of NFIP policy base, including how to\nMaintain the funding of federal flood mapping and flood mitigation programs largely paid for through SFIP premiums;\nReduce and pay off the $24.6 billion in debt owed to the U.S. Treasury by the NFIP, which is currently only paid for through premiums on SFIPs; and\nEnsure the affordability and continued availability of flood insurance to property owners in flood zones.", "type": "CRS Insight", "typeId": "INSIGHTS", "active": true, "formats": [ { "format": "HTML", "encoding": "utf-8", "url": "http://www.crs.gov/Reports/IN10450", "sha1": "351ad3a5110c62ce721436ba97d69abe21c2d09d", "filename": "files/20170602_IN10450_351ad3a5110c62ce721436ba97d69abe21c2d09d.html", "images": null } ], "topics": [] }, { "source": "EveryCRSReport.com", "id": 456408, "date": "2016-10-12", "retrieved": "2017-04-21T15:13:41.954634", "title": "Private Flood Insurance in the National Flood Insurance Program (NFIP)", "summary": "The National Flood Insurance Program (NFIP)\nThe NFIP was first authorized by the National Flood Insurance Act of 1968 (42 U.S.C. \u00a74001 et seq.), and was most recently reauthorized by the Biggert-Waters Flood Insurance Reform Act of 2012 (BW-12, Title II of P.L. 112-141). In statute, Congress has found that\n(1) many factors have made it uneconomic for the private insurance industry alone to make flood insurance available to those in need of such protection on reasonable terms and conditions; but \n(2) a program of flood insurance with large-scale participation of the Federal Government and carried out to the maximum extent practicable by the private insurance industry is feasible and can be initiated. (42 U.S.C. \u00a74001(b))\nBy law or regulation, federal agencies, federally regulated lending institutions, and government-sponsored enterprises (GSEs) must require certain property owners to purchase flood insurance as a condition of any mortgage that these entities make, guarantee, or purchase. Property owners are required to purchase flood insurance if their property is identified as being in a Special Flood Hazard Area (SFHA, which is equivalent to having a 1 in 100 or greater risk of annual flooding) and is in a community that participates in the NFIP. Historically, this has generally meant that such property owners were required to purchase a Standard Flood Insurance Policy (SFIP) from the NFIP. In BW-12, Congress explicitly allowed federal agencies to accept private flood insurance to fulfill this mortgage requirement instead of the SFIP, if the private flood insurance met the conditions defined further in statute at 42 U.S.C. 4012a(b)(7).\nRulemaking on Accepting Private Flood Insurance\nTo fulfill the mortgage requirement, a private insurance policy must provide, among other conditions, \u201cflood insurance coverage which is at least as broad as the coverage provided under a [SFIP] ... including when considering deductibles, exclusions, and conditions offered by the insurer.\u201d To implement this provision, the responsible federal agencies have issued a Notice of Proposed Rulemaking (NPRM) proposing \na safe harbor to allow lenders to rely on the expertise of State insurance regulators. Under the proposed safe harbor, if a State insurance regulator makes a written determination that a flood insurance policy issued by a private insurer meets the definition of private flood insurance\u2019 set forth in the [National Flood Insurance Act], then the Agencies will deem such policy to meet the statutory definition of private flood insurance.\u2019 \nNumerous public comments were received on the NPRM expressing concern with this approach. The federal agencies have not finalized the portion of the regulation dealing with the acceptance of private flood insurance, though they did finalize other components of the NPRM in a July 2015 final rule. \nLegislation in the 114th Congress\nThe Flood Insurance Market Parity and Modernization Act (H.R. 2901) was amended and reported by the House Financial Services Committee (H.Rept. 114-524) and passed by the House on a vote of 419-0. The Senate version (S. 1679) has not been acted on in the Senate. \nH.R. 2901 would revise the definition of private flood insurance previously defined in BW-12 at 42 U.S.C. 4012a (b)(7). The definition proposed would require federal agencies to accept private flood insurance from both admitted and non-admitted (i.e., surplus lines) insurers as long as the private insurance coverage \u201ccomplies with the laws and regulations of that State.\u201d In revising the definition, H.R. 2901 would also strike existing statutory language describing how private flood insurance must provide coverage \u201cas broad as the coverage\u201d provided by the SFIP. In effect, this would allow individual states to determine most of the specifics of private flood insurance coverage accepted by federal agencies, federally regulated lending institutions, and GSEs. The dollar amount of coverage would still have to meet federal statutory requirements and the GSEs may implement requirements relating to the financial strength of such companies offering flood insurance.\nH.R. 2901 would also clarify that if a property owner purchases private flood insurance and decides then to return to a SFIP, they would be considered having maintained continuous coverage. This provision would allow such property owners to retain their right to any subsidy or cross-subsidy on their premium rate for insurance previously provided by the NFIP (namely, the pre-FIRM and grandfathering subsidies). \nSupporters of the bill, including, for example, the National Association of Insurance Commissioners, have suggested that H.R. 2901/S. 1679 will increase the availability of private flood insurance options for property owners. Some critics of the bill, including, for example, the Center for Economic Justice, have suggested that H.R. 2901/S. 1679 will allow the private market to \u201ccherry-pick\u201d (i.e., adversely select) the \u201cprofitable, lower-risk policies\u201d of the NFIP policies of that are \u201coverpriced\u201d due to explicit cross-subsidization or imprecise flood insurance rate structures, while the government would retain those polices that benefit from those subsidies and imprecisions. \nOptions for Privatizing Flood Insurance\nSection 100232(a) of BW-12 required both FEMA and the GAO to produce separate studies that \u201cassess a broad range of options, methods, and strategies for privatizing the [NFIP].\u201d In the GAO study on privatization, the GAO reviewed a wide range of alternative strategies to encourage private flood insurance. The strategies included eliminating subsidies of NFIP premium rates entirely, or providing the subsidies in an explicit form not hidden in the premium; shifting the federal role to reinsuring primary flood insurance instead of directly providing it; mandating flood coverage in homeowners insurance policies; and authorizing the NFIP to issue catastrophe bonds to transfer some of the insured risk. \nThe required FEMA study on privatization discussed several key challenges that may be presented by privatizing a larger segment of NFIP policy base, including how to\nMaintain the funding of federal flood mapping and flood mitigation programs largely paid for through SFIP premiums;\nReduce and pay off the $23 billion in debt owed to the U.S. Treasury by the NFIP, which is currently only paid for through premiums on SFIPs; and\nEnsure the affordability and continued availability of flood insurance to property owners in flood zones.", "type": "CRS Insight", "typeId": "INSIGHTS", "active": false, "formats": [ { "format": "HTML", "encoding": "utf-8", "url": "http://www.crs.gov/Reports/IN10450", "sha1": "ff0142f4595b7c70dd307c1ae1afd2de6af05e73", "filename": "files/20161012_IN10450_ff0142f4595b7c70dd307c1ae1afd2de6af05e73.html", "images": null } ], "topics": [] }, { "source": "University of North Texas Libraries Government Documents Department", "sourceLink": "https://digital.library.unt.edu/ark:/67531/metadc855794/", "id": "IN10450_2016Apr25", "date": "2016-04-25", "retrieved": "2016-08-07T13:31:21", "title": "Private Flood Insurance in the National Flood Insurance Program (NFIP)", "summary": "This report briefly discusses federal law regarding flood insurance. By law or regulation, federal agencies, federally-regulated lending institutions, and government-sponsored enterprises must require certain property owners to purchase flood insurance as a condition of any mortgage that these entities make, guarantee, or purchase.", "type": "CRS Report", "typeId": "REPORT", "active": false, "formats": [ { "format": "PDF", "filename": "files/20160425_IN10450_a6d028be97d7f19922167db855b7bc31ded8d9b6.pdf" }, { "format": "HTML", "filename": "files/20160425_IN10450_a6d028be97d7f19922167db855b7bc31ded8d9b6.html" } ], "topics": [ { "source": "LIV", "id": "Emergency management", "name": "Emergency management" }, { "source": "LIV", "id": "Flood insurance", "name": "Flood insurance" }, { "source": "LIV", "id": "Floods", "name": "Floods" } ] } ], "topics": [] }