PCI Weighs in on National Flood Program; Says Wind Coverage Available through Private, State Programs

Federal windstorm insurance offered through the National Flood Insurance Program (NFIP) would needlessly displace the private market, disrupt existing state funds, and create a significant burden for U.S. taxpayers, according to the Property Casualty Insurers Association of America (PCI). 
 
PCI asks the U.S. Senate not to add wind insurance to the flood program (as proposed within H.R. 3121, the Flood Insurance Reform and Modernization Act) because either private or state residual markets for windstorm coverage already exist for more than 99 percent of all coastal properties in the United States. Only properties in significant disrepair, representing less than 1 percent of the total, are uninsurable through these programs. 
 
The following coastal states (and the District of Columbia) have a Fair Access to Insurance Requirements (FAIR) plan: California, Connecticut, Delaware, Georgia, Hawaii, Maryland, Massachusetts, Mississippi, New Jersey, New York, North Carolina, Oregon, Rhode Island, Texas, Virginia, and Washington. Additionally, five states (Alabama, Mississippi, North Carolina, South Carolina, and Texas) have programs designed specifically to provide windstorm coverage, and Florida and Louisiana each have a Citizens Property Insurance Corporation. 
 
“It is troubling to hear continued claims that windstorm coverage is unavailable in coastal areas, when in fact, such coverage is universally available for homes in insurable condition,” says David A. Sampson, PCI’s president and CEO. “In areas where private coverage currently does not exist, homeowners can obtain wind insurance through state residual market plans, which are doing an excellent job of providing this service to consumers. We see no reason to risk the disruptive consequences of adding wind to the federal flood program when wind coverage is already available to coastal homeowners through private insurers or the states.” 
 
PCI believes that adding wind coverage to the NFIP could create tremendous negative impacts on the national economy and the affordability of insurance coverage. The addition of wind to the flood program could result in numerous undesirable consequences: 
 
· According to a PCI analysis, the cost to the U.S. economy in the form of displaced jobs could be as high as 65,000 if the bulk of the property insurance marketplace purchased the proposed NFIP multiple-peril coverage. 
 
· Such a program could also mean a loss of more than $38 billion in private industry insurance premiums, which insurers must invest to build capital and surplus to cover insured losses. Given that insurers are also strong investors in municipal, state, and local bonds, this loss of revenue could result in a further loss of more than $24 billion in bond investments. 
 
· The loss of revenue from such a market displacement would result in more than $1 billion in lost state premium tax revenue and more than $1 billion in individual state and federal income tax revenues. 
 
· Irreparable damage to the private coastal insurance market would result from such a program being enacted; small or startup companies that voluntarily assume policies from state-run insurance plans, particularly in Florida and Louisiana, would be driven out of business. (In Florida alone, these companies account for more than 28 percent of the property insurance market and $1.9 billion in premiums.) 
 
· Availability of reinsurance may also be adversely affected, because if wind exposure shifts from the private marketplace to the NFIP, reinsurers may be less willing to invest capital in the U.S. market. 
 
“Considering the current economic challenges our country faces, we could not pick a worse time to eliminate private investment in insurance markets and destroy thousands of private sector jobs,” Sampson said. “We should find