Last week, the Center for Insurance Policy and Research (the research arm of NAIC) ran a panel discussion on Flood Risk and Insurance in Denver at the NAIC spring meeting. The panel discussion was in tandem with the release of their new study, Flood Risk and Insurance. Both the panel and the study were celebrated as successes in the room – and I’m not saying that just because I was an author of the study. The panel discussion featured a few real highlights for me:
- Robert Gordon from PCI was there to proclaim that insurers are ready and able to take on an increasing amount of flood coverage. When asked whether they could handle the losses that flood can cause, he simply stated that PCI’s members are sitting on about $688 billion in reserves, and they have access to ample risk transfer through reinsurance and insurance linked securities. No problem!
- Mr. Gordon surprised me, though, by stating that PCI is opposed to including flood in all homeowner’s policies. It turns out they are against requiring carriers to include flood, for the simple reason that not all carriers understand the peril, and some small regional carriers would struggle with accumulation in their small coverage area.
- The NFIP was represented by Roy Wright, who is the Deputy Associate Administrator for Insurance and Mitigation and directs the NFIP. Here were the highlights from Mr. Wright:
- To make the NFIP more stable, he wants/needs to double the number of policies in the next 7 years. That sounds like a tall order, until considering…
- Of the 9 million structures in Special Flood Hazard Areas (SFHAs), the NFIP insures about 2.5 million of them.
- About 1.2% of their book of business is commercial (I knew it was low, but I didn’t realize it was basically zero).
- Theresa Miller, the Insurance Commissioner for Pennsylvania, was there and was very clear that private flood insurance (both surplus lines and admitted) is important for her state. In fact, her department has a site devoted to explaining the ins and outs of flood insurance for consumers which is an absolute model of informed outreach.
Listening to the panel and reading the study paper leads to a simple and unavoidable conclusion: flood insurance will be handled more and more by insurers. There is real momentum, there is a real need, and there is no reason to limit the ability of insurers to cover flood. There is no good reason for it to not happen, and NAIC believes that, and PCI believes that, and even the NFIP knows that.
It was a good day for private flood in Denver!