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.