NARAB II
The National
Association of Registered Agents and Brokers Act, more commonly known as NARAB
II, is inching closer to becoming law. NARAB II would streamline the licensing
process for agents and brokers nationwide, eliminating burdensome multistate
requirements while preserving important state regulatory authority and consumer
protections. The legislation, which is
strongly endorsed by NAPSLO, was incorporated into S. 1926, the “Homeowner
Flood Insurance Affordability Act.”
During debate
of S. 1926, the Senate considered an amendment offered by Senators Coburn and
McCain which would have allowed states to “opt out” of participation in NARAB.
NAPSLO and other industry representatives sent a joint letter opposing the
Coburn-McCain amendment, explaining that its inclusion would be detrimental to
the underlying program. Our efforts proved successful as the Senate defeated the
amendment by a convincing vote of 24-75. This was an historic day as it was the
first time the body had passed the legislation. Similar legislation passed the
House in September by a vote of 397-6.
The
underlying flood legislation will now go to the House where it is expected that
Republicans will introduce and pass an alternative proposal. NAPSLO has
received commitments from House leadership that the NARAB II provisions will
also be included in their flood legislation and so once the House has passed
its legislation the House and Senate versions will be negotiated to produce a
“conferenced” bill. With both chambers supporting the underlying NARAB II
provisions, it will become law once that conferenced bill is enacted by both
chambers and signed by the President.
Homeowner Flood Insurance
Affordability Act
On Thursday,
the Senate passed S. 1926 which delays implementation of the risk-based flood
insurance rates prescribed by the Biggert-Waters Flood Insurance Reform Act.
This has become an extremely political issue as residents in flood-prone areas
have been subject to significant rate increases. S. 1926 would delay
implementation for up to four years.
NAPSLO’s
focus on flood insurance reform has been to ensure surplus lines insurers are
eligible to offer private market solutions and alternatives to consumers in
need of unique and complex flood risks.
To
accomplish this, NAPSLO worked with Senators Heller and Lee on an amendment to
clarify the definition of private flood insurance to include policies offered
by insurance companies that may be “eligible as a nonadmitted insurer to
provide insurance in the State or jurisdiction where the property to be insured
is located, in accordance with section 524 of the Dodd-Frank Wall Street Reform
and Consumer Protection Act (15 U.S.C. 8204)”. The amendment failed by a narrow
49-50 margin over concerns surrounding standards for private flood insurance
policies and consumer protections. NAPSLO continues to work to educate Senators
as to the role and regulation of nonadmitted insurers to alleviate these
concerns. In addition, we are working heavily with leadership in the House to
ensure that the language is included in their alternative flood proposal.
GAO Releases Flood Insurance
Report on Strategies for Increasing Private Sector Involvement
Last week,
the GAO released a report to Congress on the National Flood
Insurance Program focused on ways to reduce the financial burden on the federal
government.
The 2014
report notes no new conclusions or recommendations since its earlier June 2011
report. The purpose of the report was to provide strategies for the federal
government to increase private market participation in flood insurance. The report
indicated that key to private market participation is allowing private insurers
to charge what is appropriate and commensurate with the underlying risk. NAPSLO
was pleased with the GAO’s continued recommendations and support of private
market solutions to the financial challenges facing the NFIP.
The
Biggert-Waters Insurance Reform Act of 2012 directed the GAO to consider
various strategies for privatizing the NFIP. This report concluded that in
order to increase private market participation, private insurers would require
(1) the ability to charge actuarially sound rates to ensure profitability, (2)
the ability to decline applicants and (3) sufficient consumer participation.
Key findings of the report include:
• Eliminate
subsidized rates and charge policyholders risk-based rates, limiting the Flood
Program to direct means-based subsidies.
• Implement
recommended strategies in order to increase the private market participation to
reduce the debt of the NFIP.
• The NFIP
operates as a residual market of last resort for policies decline by the
private sector.
• The
Government could consider assuming the role of reinsurer, although the report
acknowledges the consumers would have to absorb these costs.
