PCI Strongly Opposes Proposed Federal Windstorm Insurance

PCI says that proposed federal windstorm insurance offered through the National Flood Insurance Program (NFIP) is needless. In fact, David A. Sampson, president and CEO of PCI, calls the proposal a “solution in search of a problem.”

PCI has requested 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 are uninsurable through these programs, and those represent less than 1 percent of the total.

Sampson said it’s “troubling” to hear untrue claims that windstorm coverage is unavailable in coastal areas. In fact, coverage is universally available for homes in insurable condition.

Along with the District of Columbia, the following coastal states 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.

Five other states—Alabama, Mississippi, North Carolina, South Carolina, and Texas—have programs to provide windstorm coverage, and Florida and Louisiana each have a Citizens Property Insurance Corporation.

“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,” Sampson explained. “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 have negative effects on the national economy and the affordability of insurance coverage, such as:

• As many as 65,000 displaced jobs if the bulk of the property insurance marketplace purchased the proposed NFIP multiple-peril coverage, according to a PCI analysis.
• 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.
• 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. 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.
• Potential limited availability of reinsurance. 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 a better way to assist coastal homeowners who truly cannot afford their wind insurance premiums.”