This week, the U.S. House of Representatives Committee on Financial Services Subcommittee on Housing and Insurance held two insurance-specific hearings: “The Impact of International Regulatory Standards on the Competitiveness of U.S. Insurers, Part II” and “Opportunities for a Private and Competitive Sustainable Flood Insurance Market.”

The hearing on global regulation focused on the various international regulatory standards proposed by the G-20, the Financial Stability Board, the International Association of Insurance Supervisors (IAIS) and other international supervisory authorities. A robust discussion addressed the transparency of the IAIS as a standard setting body, and Subcommittee Chairman Neugebauer (R-Texas) said any international standards the IAIS develops must be flexible and cannot have a negative impact on the diversity of the U.S. insurance market.

Another discussion addressed domestic capital standards, and Thomas Sullivan, Sr., Board of Governors of the Federal Reserve advisor, acknowledged that large insurers should have specifically tailored capital standards if they come under Federal Reserve oversight that differ from the banking industry requirements. He specifically asked Congress to give the Federal Reserve more flexibility to differentiate between the two institutions by passing H.R. 4510, the “Insurance Capital Standards Clarification Act.” The Big “I” has long supported the premise that banking and insurance industries require distinct regulatory standards and supports this legislation.

The second hearing focused on H.R. 4558, the “Flood Insurance Market Parity and Modernization Act of 2014,” by Reps. Dennis Ross (R-Florida) and Patrick Murphy (D-Florida). This proposal would increase the availability of private market flood insurance alternatives to the NFIP by having state insurance regulators determine acceptable private market flood insurance policies.

Biggert-Waters specifically reiterated that limited private flood insurance has been meant to work hand in hand with the NFIP since its inception in 1968. Unfortunately, exactly what makes an “acceptable” private market flood policy is unclear. Currently, mortgage lenders are unsure whether private market alternatives satisfy the “mandatory purchase” requirement and therefore either require the private policy to look nearly identical to an NFIP policy or in many cases simply refuse to accept private policies. Additionally, federal banking regulators have begun the process for making a rule determining what makes an “acceptable” private policy. This legislation would appropriately allow state insurance regulators to determine acceptable flood insurance policies instead of federal banking regulators or the lenders themselves.

The Big “I” is supportive of the goals of H.R. 4558, but did submit testimony at the hearing detailing a concern about the fact that, as currently written, a private policy would not count as “continuous coverage” for purposes of keeping an NFIP-subsidized policy or grandfathered rate. The Big “I” believes “continuous coverage” should mean continuous flood insurance coverage, no matter the source of the policy. Of particular concern is that the current language could discourage consumers from even experimenting with the private market since they would risk losing their subsidy and/or grandfathered status.

The Big “I” is also concerned about the increased potential for E&O for agents and brokers if the private policies are not considered as “continuous coverage.” The hearing addressed this issue at length, and the Big “I” is optimistic about making this change to H.R. 4558 through the legislative process.

John Prible is Big “I” vice president of federal government affairs. Jen McPhillips is Big “I” senior director of federal government affairs.