Private Flood

Federal Definition of Private Flood Insurance

Since 2014, WSIA has strongly supported the Flood Insurance Market Parity and Modernization Act, which seeks to revise the definition of private flood insurance as it pertains National Flood Insurance requirements. In many instances, when consumers have a federally backed mortgage, they are required to purchase flood insurance. Revisions are necessary to ensure that private flood solutions, as a supplement to the National Flood Insurance Program (NFIP), will be available to consumers and accepted by lenders.

The current definition of private flood insurance was adopted in July 2012 as a provision of the Biggert-Waters Flood Insurance Reform Act of 2012, which granted a five-year extension to the NFIP and intended to increase individuals’ and businesses’ reliance on private market flood insurance policies as an alternative to the NFIP. Prior to BW12, private market flood insurance policies existed but were more heavily utilized by consumers not subject to the mandatory purchase requirement or as a supplement to a required NFIP policy.

BW12 includes unclear and outdated language and has led to uncertainty and confusion in the lending community about how private policies fulfill the mandatory purchase requirement. Additionally, the language referencing surplus lines does not comply with or reflect what was adopted by Congress in the Nonadmitted and Reinsurance Reform Act of 2010 (NRRA). Because of the definition in BW12, lenders have difficulty distinguishing the compliance requirements.

Since BW12’s adoption, insurance and banking trade associations, along with other impacted industries including builders’ and realtors’ trade groups, have worked to clarify the original intent of BW12 and provide NRRA-compliant language to allow additional development of the private flood insurance market and ensure the solutions are accepted. The private flood legislation reflects the industry and Congress’ joint efforts to address the concerns. The legislation has gained significant support in both the House and Senate but has never successfully passed both chambers to become law.

Information on the progress of this legislation can be found in past WSIA Legislative Updates on the WSIA News page. A high-level overview of legislative activity since the 2014 introduction of the legislation follows.

Timeline of Legislative and Regulatory Activity

Click here for a historical overview of private flood insurance legislative and regulatory activity since the adoption of the Biggert-Waters Flood Insurance Reform Act of 2012.

117th Congressional Session: January 2021 – December 2022
  • September 30 – Congress issued short-term extension to December 30, 2021. 
116th Congressional Session: January 2019 – December 2020
  • September 30 – Congress issued short-term extension to September 30, 2021. 
  • January 25 – Seven years after BW12 was passed, five federal agencies that oversee lenders (FDIC, OCC, Federal Reserve, NCUA, and FCA) released the Final Rule for Loans in Areas Having Special Flood Hazards (to be effective July 1, 2019). BW12 required the agencies to issue a rule to provide guidance for lenders in the acceptance of private flood insurance policies.
  • March 11 – Rep. Castor (D-FL) and Rep. Luetkemeyer (R-MO)  filed H.R. 1666, standalone legislation to allow policyholders to move between NFIP and private flood insurance policies to meet requirement to have continuous coverage in order to return to NFIP without penalty. This bill used similar language to that proposed in previous private flood bills.
  • May 30 – Congress extended the NFIP for two weeks to June 14. Both the House and Senate had passed extensions that would have taken the program through September 30, but the Senate version was tied to a disaster relief package, differing from the House version, necessitating a short extension until Congress returned from the Memorial Day recess. 
  • July 1 – Final Rule for Loans in Areas Having Special Flood Hazards becomes effective.
  • June 3 – Congress returned to Session and passed an extension to September 30, as part of national disaster relief package. 
  • June 12 – The House Financial Services Committee unanimously passed the NFIP Reform Act (H.R. 3111) and the NFIP Reauthorization Act (H.R. 3167) but neither included private flood insurance provisions and no companion bills filed in Senate.
    • H.R. 3111 created a five-year pilot program to inspect pre-existing structural conditions of insured and pre-insured properties; required GAO to study flood insurance coverage treatment of earth movement; made changes to the claims process including: (1) codifying an enhanced policyholder appeals process established by FEMA for individuals appealing a full or partial denial; (2) required the Administrator to monitor and oversee litigation conducted by the WYOs to ensure that expenses are reasonable, appropriate and cost-effective; (3) prohibited the hiring of disbarred attorneys; and (4) required a GAO study on claims adjustment process. It also prohibited false or fraudulent statements in connection with the preparation production or submission of claims adjustment or engineering reports.
    • H.R. 3167 would have reauthorized the program through September 30, 2024; addressed affordability through (1) creating a five-year demonstration program for means-tested assistance to low-income policyholders; (2) repealed surcharges; (3) enabled policyholders to pay premiums in monthly installments; and (4) created a state revolving loan fund. It would have raised the amount of funds available under the Increased Cost of Compliance program, targeted mitigation funding for repeatedly flooded communities and authorized additional funding for mapping.
  • July 18 – Led by Sen. Menendez (D-NJ) and filed by a group of bipartisan Senators S. 2187, the NFIP Reauthorization and Reform Act, would have extended the program for five years, controlled premium rate increases, introduced vouchers, and addressed mitigation and mapping reforms. There were no provisions for revising the definition of private flood insurance, continuous coverage or supporting increased opportunities for private market alternatives.
  • September 26 – Congress issued short-term extension of NFIP through November 21, joining the program extensions back into the federal spending package.
  • November 20 – Congress issued short-term extension of NFIP through December 20. 
  • December 19 – Congress issued short-term extension to September 30, 2020
115th Congressional Session: January 2017 – December 2018
  • January 19 – The federal government was temporarily shut-down when Congress fails to pass its budget. As part of the government shut-down, the NFIP temporarily shuts down as well; however, the government shut-down lasted until January 22, and the NFIP became operational again. As part of the Budget Omnibus package, Congress extended the NFIP through February 8.
  • February 8 – Congress included the reauthorization of the NFIP in another short-term extension of the Omnibus action, resulting in new March 23 expiration date for the program.
  • March 23 – NFIP was extended through July 31, separating the NFIP from the budget process.
  • July 31 – Congress issued another short-term, four-month extension of the NFIP through November 30. No action was taken on private flood insurance legislation as part of the extension.
  • November 30 – NFIP was granted a one-week extension to December 7.
  • December 6 – Congress extended the NFIP for two weeks to December 21, the same deadline for the Continuing Resolution that had to be passed to continue funding significant portions of the federal government.
  • December 21 – A coalition of industry trade associations issued joint comments to federal banking regulators highlighting suggestions and concerns with the still pending draft rule required by BW12 to provide guidance on the acceptance of private flood insurance. With the NFIP in danger of lapsing, Congress and the President agreed to extend the program to May 31, 2019 and allow the next Congress to address reforms and long-term reauthorization of the NFIP as well as the technical revisions to the definition of private flood insurance sought by the Flood Insurance Market Parity and Modernization Act.
  • December 22 – The federal government shutdown effective December 22 at 12:00 a.m.
  • December 26 – FEMA announced its determination that the NFIP could not issue new or renewal policies during a federal government shutdown and declared no new or renewal policies would be issued from December 22 until the shutdown was resolved or in the event that it determined that conditions exist (e.g. a significant impact to the national economy) which might justify the resumption of activities in advance of an appropriation.
  • December 28 – FEMA rescinded its December 26 guidance, noting that NFIP insurers could resume the sale, renewal and monetary endorsements for flood insurance policies and to treat the program as operational since December 21, 2018 without interruption.
  • December – Rep. Ross and Sen. Heller left Congress.
  • March 8 – Flood legislation was reintroduced in both chambers as H.R. 1422/S.563 with Rep. Kathy Castor (D-FL) replacing Rep. Murphy as a cosponsor.
  • June 21 – House Financial Services Committee passed H.R. 1422 as part of a broader package to address reform and reauthorization of the National Flood Insurance Program (NFIP), but the full House and Senate did not pass the legislative package.
  • September 28 – The House added H.R. 1422 to an unrelated bill to reauthorize the Federal Aviation Authority, but the Senate declined to approve the legislation with the private flood provision.
  • November 14 – The House passed the 21st Century Flood Reform Act (H.R. 2874), a comprehensive flood insurance package with a five-year reauthorization and reform of the NFIP, including the Ross-Castor private flood legislation. Although the Senate did not take action on this version of the bill, it was expected to provide some form of a companion proposal which would incorporate some of the House bill.
  • December 8 – The House and Senate both adopted a short-term extension of NFIP to December 22.
  • December 22 – NFIP short-term reauthorization was extended to January 19, 2018.
114th Congressional Session: January 2015 – December 2016
  • January 13 – WSIA legacy organization, NAPSLO, testified in support of H.R. 2901 before the House Financial Services Subcommittee on Housing and Insurance.
  • April 28 – U.S. House of Representatives passed H.R. 2901 on a 419-0 vote, after passing the House Financial Services Committee 53-0.
  • December – Congress adjourned, the legislation died with no action from Senate, Rep. Murphy leaves Congress.
  • Legislation was reintroduced as H.R. 2901/S. 1679 and once again sponsored by Representatives Ross (R-FL) and Murphy (D-FL) and Senators Jon Tester (D-MT) and Heller (R-NV)
  • The bills did not receive any hearings but remained alive and moved forward to the second year of the Congressional session.
113th Congressional Session: January 2013 – December 2014
  • January 30 – In consideration of S. 1926 and an effort to delay the implementation of BW12, Sen. Dean Heller (R-NV) proposed an amendment to revise the definition of private flood insurance to ensure acceptance of private market flood solutions for individuals and businesses. The amendment failed by one vote.
  • March 13 – Congress passed The Homeowner Flood Insurance Affordability Act of 2014 (H.R. 3370) to delay BW12 rate increases but did not take action to correct the definition of private flood insurance
  • May 1 – The Flood Insurance Market Parity and Modernization Act (H.R. 4558/S. 2381) was introduced by Congressmen Dennis Ross (R-FL) and Patrick Murphy (D-FL) and Senators Jon Tester (D-MT) and Dean Heller (R-NV), for the first time as standalone legislation, and was similar to the language proposed earlier in Sen. Heller’s amendment.
  • No further actions were taken on the private flood legislation and it died at the end of the Congressional session.

Federal Banking Agencies Rule Timeline: October 2013 – July 1, 2019

BW12 required the five federal banking agencies that oversee lenders (FDIC, OCC, Federal Reserve, NCUA, and FCA) to issue guidance on the acceptance of private flood insurance policies impacted by the mandatory purchase requirement.

  • October 2013 – The agencies jointly sought comments from interested parties regarding how to review and apply the new definition of private flood insurance when a mortgage is required to carry this hazard insurance. Fifty-one comments were submitted that addressed the proposal, with almost all indicating concerns.
  • 2014 & 2015 – No action was taken by the agencies on the comments
  • October 2016 – Agencies revise the proposal and sought additional comments.
  • January 2017 – The agencies received 60 comments and almost all reflected concern with lack clarification provided by the draft rule.
  • October 2018 – The agencies announced intent to issue a Final Rule by the second quarter of 2019.
  • December 2018 – Following the announcement, a coalition of interested parties, including WSIA, provided additional written comments, reiterating our joint positions.
  • January 25, 2019 – The agencies released their Final Rule, which became effective July 1, 2019, which generally:
  • adopted the BW12 definition of private flood without any of the recommended revisions requested by the coalition;
  • under the “Mandatory Acceptance” provision, required lenders to accept certain private flood insurance policies that meet the regulatory definition;
  • introduced a “Compliance Aid” to allow lenders to rely upon a self-certification by the insurer that the policy meets the regulatory definition; and through the “Discretionary Acceptance” provision, largely maintains the lender’s ability to accept private flood insurance that does not meet the regulatory definition, so long as the policy provides sufficient protection to the loan in accordance to the lender’s general safety and soundness requirements.
  • In the preamble of the rule, the agencies stated they did not believe there is was a need to clarify that surplus lines policies may be accepted for both commercial and residential risks — because they interpreted Congress’ intent to apply equally to the admitted and nonadmitted markets. Without specific statutory or regulatory revisions, our concern remains whether the current statute and now the Final Rule adequately promote private market development as intended.

Although the rule provides some clarification, WSIA continues to believe that legislation is necessary to ensure appropriate application of the original intent of BW12 and to correct incorrect and confusing language in the law.

NFIP Reauthorization and Extensions Timeline: September 2017 - present

Reauthorization of the National Flood Insurance Program (NFIP) has been tied off and on to the private flood legislation and remains a significant component in the discussion. The NFIP received a five-year extension as part of the BW12 legislation, setting its expiration date as September 30, 2017. The NFIP has failed to receive a long-term extension since that date and has, alternately, received 16 short-term extensions:

  1. September 30 – December 8, 2017 (Extension marries program to federal budget process)
  2. December 8 – December 22, 2017
  3. December 22, 2017 – January 19, 2018 (January 19 government shutdown)
  4. 4. January 22 – February 8, 2018 (February 8 - government shutdown for one hour)
  5. February 9 – March 23, 2018 (Extension decouples program from federal budget process)
  6. March 23 –July 31, 2018
  7. July 31 – November 30, 2018 (Extension marries program to federal budget process)
  8. November 30 – December 7, 2018
  9. December 7 – December 21, 2018
  10. December 21, 2018 – May 31, 2019 (Extension decouples program from federal budget process. December 21 partial shutdown determined not to apply to NFIP)
  11. May 31 – June 14, 2019 (Procedural objection to extension issued)
  12. June 3 – September 30, 2019 (Extension marries program to federal budget process)
  13. September 27 – November 21, 2019
  14. November 20 - December 20, 2019
  15. December 19, 2019 - September 30, 2020
  16. September 30, 2020 - September 30, 2021

Material Supporting Legislation