Page 7 - 2016 State of the Market from AmWINS

AmWINS State of the Market | 57

FEATURED TREND: FLOOD

Changes to NFIP and legislative action create opportunity in the private flood market

The National Flood Insurance Program law, stating that private coverage satisfies However, there may not be a rapid influx
(NFIP) saw significant changes in 2016. the requirement for purchasing flood of carriers entering the market. Flood
Effective April 1, the program began insurance for federally backed mortgages. remains a difficult peril to underwrite, with
eliminating or reducing rate subsidies and The act has strong bi-partisan support the modeling support needed to do so
implementing a 25 percent annual rate and is expected to pass into law in the only just beginning to emerge.
increase until “full-risk rates” are achieved current congressional session.
for all pre-FIRM (Flood Insurance Rate Through strong relationships with London
Map) subsidized policies. These changes “Changes to the NFIP were important, but syndicates and certain other specialty
affect non-primary residential properties, far more significant is H.R. 2901,” says markets already writing private flood
properties with severe repetitive loss, Harry Tucker, executive vice president coverage, a wholesaler such as AmWINS
and properties that were substantially and national property practice leader offers retail agents and brokers an
damaged or improved. at AmWINS Group, Inc. “If enacted, the advantage when securing coverage for
legislation would not only treat private customers.
A major development in the expansion insurance the same as federal flood
of the private flood insurance market insurance, but would also allow NFIP Ultimately, the combination of NFIP rate
also occurred when the House Financial policyholders to leave the NFIP and secure increases and expansion of the private flood
Services Committee introduced the Flood a private policy, yet come back to the NFIP market is a positive development for buyers,
Insurance Market Parity and Modernization after a loss without penalty. That will really giving them more competitive rates and
Act (H.R. 2901). H.R. 2901 clarifies current open up the market.” choices to customize coverage.

• Fitch Ratings reports it would take storm losses equal to 15 percent or more of the industry’s aggregate surplus to
change conditions.

• Several new players, including alternative capital sources, have entered the market.
• Underwriting appetites are aggressive in catastrophe-prone regions with deductibles shifting downward.
• Despite global terror activity, terrorism coverage is available nearly everywhere.
• Property reinsurance remains readily available with rate reductions of 10 to 25 percent common; however, there are

signs that reinsurers are reaching the bottom of their technical pricing.