At today’s Financial Services Committee hearing entitled, “How to Create a More Robust and Private Flood Insurance Marketplace,” Congresswoman Maxine Waters (D-CA), Ranking Member of the Committee on Financial Services, discussed private sector involvement in the flood insurance market.
Ranking Member Waters was encouraged by the discussion to improve the Flood Insurance Market Parity and Modernization Act, H.R. 2901, but underscored some concerns she has, while advocating for a bipartisan bill that “will give lenders clarity and protect consumers.”
Full text of her remarks, as prepared for delivery, is below.
Thank you Mr. Chairman and welcome to all of our witnesses today. We are here to discuss private sector involvement in the flood insurance market.
I certainly believe that there is an important role for the private market to play, and I am particularly interested in the bill we will be discussing today by Representatives Ross and Murphy.
I commend both of these Members for their work on this important legislation, and I hope that we can move forward with a bipartisan bill that will give lenders clarity and protect consumers.
Moreover, I am pleased that Reps. Murphy and Ross have expressed an interest in working with me to address the few concerns that I have with this otherwise thoughtful piece of legislation.
While I am encouraged by ongoing discussions to improve this legislation, I do want to state some concerns for the record.
First, we must maintain adequate federal oversight. The federal mandatory purchase requirement is as much about protecting borrowers as it is about protecting our federal banking and housing regulators, and the U.S. taxpayer. Our regulators must have the authority to set necessary requirements on the private companies from which they will be required to accept coverage.
Second, we must be mindful not to eliminate important consumer protections as we expand this market. At a minimum, it does not make sense to eliminate disclosures that borrowers currently receive. Additionally, insurance contracts and rates should be reviewed and regulated by state regulators, which does not occur in the surplus lines market.
Lastly, the surplus lines market currently provides most of the available private flood insurance, but a large portion of this is for excess coverage, which only provides coverage above and beyond the NFIP policy.
I have some concerns about the ability and willingness of surplus lines carriers to cover first-dollar losses. And these carriers are not able to access state guaranty funds. I worry that when disaster strikes, our policyholders, lenders, and regulators will be left holding the bag. The surplus lines market does play an important role and should continue to provide the coverage it already does, particularly to commercial buyers. However, as we move forward we must ensure that the average consumer will be protected.
In spite of these concerns, I remain hopeful that with modest changes to the bill, we can achieve broad, bipartisan consensus. I look forward to continuing discussions to improve this legislation and quickly consider it on the House floor.
Thank you, and I yield back the balance of my time.