House Committee Concludes Markup of Flood Legislation

Yesterday, the U.S. House of Representatives Committee on Financial Services concluded its markup of several bills aimed at reforming and reauthorizing the NFIP.

Of greatest interest to Big “I” agents was H.R. 2874, the “21st Century Flood Reform Act” by Subcommittee Chairman Rep. Sean Duffy (R-Wisconsin). The bill, which addresses WYO compensation, passed the markup along party lines by a vote of 30-26. No Democrats supported the legislation.

H.R. 2874 includes provisions that would cap WYO insurers’ reimbursement rate at 27.9% to administer the NFIP. Currently, the rate is 30.9%. If this bill is signed into law, WYO companies would still receive additional compensation above that cap for claims handling-related costs, or if the NFIP Administrator deemed additional payments necessary. The3% reduction would be phased in over three years, and the NFIP would have to reduce administrative costs and burdens on the WYO program by at least 1.5% over the same time period.

The bill originally contained a much deeper cut to the WYO program, which would have forced WYO carriers to leave the program in droves and caused drastic reductions in agent commissions. The Big “I” and the major property-casualty insurer trade associations—the National Association of Mutual Insurance Companies, the Property Casualty Insurers Association of America and the American Insurance Association—strongly opposed that version of the bill. As a coalition, they worked together to obtain multiple changes to the legislation, such as the revisions to minimize the WYO program cuts, which would save both insurers and agents millions of dollars per year.

The Big “I” was the only agent and broker group invited to participate in these critical discussions on Capitol Hill. As a result of the changes, all the insurer trade associations endorsed the package the committee passed yesterday; however, the Big “I” adopted a neutral position on the new package and refused to endorse any legislation that could potentially result in commission cuts. This position also enables the Big “I” to seek additional improvements in the U.S. Senate.

Another bill of interest for the Big “I” was H.R. 1422, the “Flood Insurance Market Parity and Modernization Act,” by Reps. Dennis Ross (R-Florida) and Cathy Castor (D-Florida). This bill clarifies that a private flood policy can satisfy the mandatory purchase requirement for flood insurance, including on Federal Housing Administration-insured mortgages. Most important for the Big “I,” the legislation would also allow private flood insurance to satisfy NFIP continuous coverage requirements, which is an important errors & omissions protection for agents. This bill passed the House unanimously last Congress and also passed the full committee with unanimous support at the markup earlier this week.

The seven separate bills will now need to be combined into one large bill and potentially brought to the floor for a full House vote.

Meanwhile, the Senate has introduced two bills to address NFIP reauthorization. The Big “I” also awaits a bill from the Chairman and Ranking Member of the Senate Banking Committee, Sens. Mike Crapo (R-Idaho) and Sherrod Brown (D-Ohio). The Banking Committee bill is expected to be the vehicle for NFIP reauthorization in the Senate.

Jen McPhillips is Big “I” vice president of federal government affairs.