Tomorrow, the House is expected to vote on a bipartisan proposal that would end the federal government’s monopoly on flood insurance by expanding private insurance options. On March 2, the bill passed the House Financial Services Committee with unanimous support.

The Flood Insurance Market Parity and Modernization Act (H.R. 2901), sponsored by Reps. Dennis Ross (R-FL) and Patrick Murphy (D-FL), clarifies federal regulations to make clear that insurance is treated the same as federal flood insurance for mandatory purchase requirements. This will allow competition in the flood insurance market, providing an alternative for the five million-plus Americans who rely on the National Flood Insurance Program (NFIP), which is $23 billion in debt.

Since 1968, the NFIP has provided coverage for floods stemming from storms, hurricanes, and other flood-related events. The federal government has long offered subsidized, below-market rates that discourage competition. At the same time, regulatory barriers prevent private insurers from satisfying flood insurance mandates (the requirement that federally backed mortgages in flood hazard areas purchase flood insurance). As a result, most coverage is written by NFIP with a limited role for private insurers; private companies now mostly provide coverage for commercial properties, and coverage above the maximum $350,000 ($250k property; 100k contents) policies allowed by the NFIP.

In contrast to the federal program, private flood insurers can react more quickly to changes in climate conditions or flooding patterns, resulting in rates that are more accurately priced and convey the full risk confronting a home or business owner.

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