After flying through the House, many believed the Flood Insurance Market Parity and Modernization Act would zip through the Senate, too. The Act was thought to become law sooner than later. However, things didn't go as smoothly as planned in the Senate.
The National Association of Professional Surplus Lines Offices (NAPSLO) and their officials continue to work to get the bill through the Senate. They continue to work to get this Act into law.
Understanding the Act
Why is the Flood Insurance Market Parity and Modernization Act of such importance for NAPSLO? For a variety of reasons, but one seems to stand out: the bill clarifies the Biggert-Waters Flood Insurance Reform Act of 2012 (BW-12).
The new Act defines the ability of privately issue flood insurance when meeting a lenders' purchasing requirements. Initially, the Act required lenders to accept private flood insurance for mandatory purchase. Then language was added before the bill was passed that created confusion. Lenders who were evaluating policies for the purpose of complying with mandatory flood insurance requirements became confused.
Now, the Flood Insurance and Market Parity and Modernization Act clearly defines a private flood insurance policy as:
"A policy issued by a company licensed, admitted or otherwise approved by the state."
According to Brady Kelly, the Executive Director of the NAPSLO, the bill strives to clarify a number of items, including the surplus lines market:
"All we're doing in this legislation is clarifying that the Surplus Lines market is, in fact, an eligible market from which to accept a private Flood insurance policy. I say that because Surplus Lines insurers have long written Flood insurance policies — this isn't a new opportunity.
Before BW-12 was signed, our market has always served as a supplement to the NFIP There are a number of homes and commercial properties that don't fit within the terms and conditions of the NFIP policy.
So we've oftentimes served as an excess option, or an option when the NFIP policy doesn't do the trick. From that perspective, the primary goal is to preserve the types of solutions the market was already providing."
No Smooth Sailing
While the bill is hung up at the Senate now, the House was no issue. In April of last year, the Flood Insurance Market Parity and Modernization Act flew through the House with a vote of 419-0.
While the victory seemed like smooth sailing, many have noted the result stemmed from a lot of hard work. The NAPSLO began educating legislators on the bill and the surplus lines marketplace at the start of 2014. These efforts were in preparation for the day the bill reached the House.
According to NAPSLO higher-up Keri Kish, the surplus line marketplace is:
"It's not something everyone just knows about and understands. Our education really helped them understand how the Surplus Lines market functions as part of the private insurance market — how we developed and why it's important to maintain our ability to provide those options."
Luckily, many believe the failure in the Senate was more due to timing than legitimate concern over surplus lines. The election took a lot of time and energy for those in Washington. Many Senators were in heated state races and didn't have time or concern to hear about flooding.
Once the elections have passed, many surmise the bill will get more focus in the Senate. Not only will the election be over, but increased interest in flood issue will be coming up next year, as the National Flood Insurance Program is being reauthorized.
Optimism in 2017
Many NAPSLO members are excited and optimistic about the idea of the bill passing the Senate in 2017. Kish certainly is:
"I'm confident it will pass this year. There's no reason not to do it now. Ultimately, this is giving consumers choices. I can see no policy concerns in passing it this year."
While optimism is good, we'll have to wait and see if the bill goes through. If issues arise, the potential impact on the surplus line marketplace will certainly be noticed. The bill needs to be passed if the private market is to be a viable alternative to the NFIP.