Flood Insurance Solution Takes Big Step Forward

Property owners who opt to purchase flood insurance in the private market rather than through the National Flood Insurance Program (NFIP) may do so under current rules, but they may be charged higher rates if they want to return to NFIP coverage.

But there's hope for a change: H.R. 2901, the "Flood Insurance Market Parity and Modernization Act," unanimously passed the U.S. House of Representatives Thursday. It now goes to the Senate for consideration. If approved by the Senate, it then needs President Obama's signature to become law.

The National Association of Realtors® (NAR) backs the bill, which was introduced by two Florida representatives.

"NAR is grateful to Congressmen Dennis Ross (R-Fla.) and Patrick Murphy (D-Fla.) for their leadership on this important issue," said NAR President Tom Salomone, broker-owner of Real Estate II Inc. in Coral Springs, Florida.

"Realtors know that a robust National Flood Insurance Program is important for protecting consumers and ensuring property sales can move forward in 20,000 communities nationwide," says Salomone. "For many, the NFIP offers the only source of coverage that meets federally related mortgage requirements and protects properties in the 100 year floodplain."

But "consumers who wish to purchase insurance in the private market should have the freedom to do so," he adds. "This legislation will help foster a vibrant private flood insurance market while giving consumers the flexibility to return to the NFIP at a reasonable cost if they choose to."

Under current regulations, the NFIP requires homeowners to keep a minimum amount of flood insurance coverage to enjoy the program's lowest rates. If a homeowner leaves NFIP and opts for coverage from a private insurer, NFIP currently considers it a "break" in coverage, even if the private insurance product offers comparable coverage for the property. That "break" in coverage can then lead to higher rates for returning customers.

Sometimes consumers return to the NFIP when a private insurance product goes up in price or is no longer available. H.R. 2901 would change this by clarifying that private flood insurance that meets state law will be considered continuous coverage. If the bill becomes law, property owners could then move seamlessly between the NFIP and private insurance markets without a risk of arbitrary rate increases.

Earlier this year, NAR wrote to members of the House Financial Services Committee and asked them to support the bill, H.R. 2901. It later passed the committee by a unanimous vote, clearing the way for Thursday's vote on the House floor. 

NAR, along with members of the SmarterSafer coalition, also urged urge House Speaker Paul Ryan (R-Wis.) to bring the bill up for a vote.

NAR President Tom Salomone praised the bill's passage, calling it a step forward for reform of the broader flood insurance system.

Florida Realtors® April 29, 2016