On December 2, 2013, a coalition comprised of The R Street Institute, The American Consumer Institute and the National Taxpayers Union (the “Coalition”) sent a letter to the federal banking regulators at the U.S. Office of the Comptroller of the Currency, FDIC, NCUA, Farm Credit Administration and Federal Reserve Board. The letter was sent in connection with the proposed regulations being prepared for the implementation of the Biggert-Waters Flood Insurance Reform and Modernization Act of 2012 (the “Act”), which reforms the National Flood Insurance Program (NFIP). The Act allows private flood insurance to satisfy mandatory purchase requirements for lenders if the policy meets certain coverage requirements. The Coalition requests, among other things, that the federal banking regulators incorporate the following concepts into the regulations:
- Separate “safe harbor” procedures, whereby state insurance regulators can deem certain policies acceptable for mandatory purchase requirements, need to be developed for surplus lines insurance as it is not subject to rate and form filing requirements.
- The definition of “flood insurance” should be broadened to allow for alternative policy types to satisfy mandatory purchase requirements to allow consumers more coverage options, such as community-wide policies.
- Any insurer offering flood insurance that does not meet the statutory definition of “flood insurance” should be required to have a rating from a Nationally Recognized Statistical Rating Organization that indicates financial security (e.g., A.M. Best rating of B+ or better), because most alternative coverages will be issued by surplus lines insurers who are not required to participate in state guaranty funds and have less regulatory supervision.
For a copy of the complete letter, click here.