The American Bankers Association (ABA) appreciates the opportunity to provide a Statement for the Record for this hearing, How Do We Encourage Greater Flood Insurance Coverage in America?
The American Bankers Association (ABA) appreciates the opportunity to provide a Statement for the Record for this hearing, How Do We Encourage Greater Flood Insurance Coverage in America? ABA is the voice of the nation’s $23.6 trillion banking industry, which is composed of small, regional and large banks that together employ more than 2 million people, safeguard $19.2 trillion in deposits and extend $12.2 trillion in loans.
ABA appreciates the Subcommittee’s decision to hold this hearing regarding the uptake rates of private flood insurance, which often provides more affordable and comprehensive coverage than federally-supported flood insurance issued through the National Flood Insurance Program (NFIP). The banking industry welcomed the provision in the Biggert Waters Flood Insurance Reform Act of 2012 (BWA), which clarified that banks can accept private flood insurance to satisfy the Flood Disaster Protection Act’s (FDPA) mandatory purchase requirement for properties located in a special flood hazard area (SFHA). Both taxpayers and property owners benefit from widely available private flood insurance, as private insurance reduces the burden on the federal government and offers property owners an alternative for insuring against flood loss. While BWA sought to promote the availability and purchase of private flood insurance, we are concerned that regulatory inconsistency and confusion regarding the acceptability of privateflood have hampered BWA’s goal and the development of the private insurance market.
By way of background, the FDPA requires banks, credit unions, and other federally regulated lenders to ensure that loans secured by property located in an SFHA purchase and maintain flood insurance that meets regulatory minimum coverage amounts. This mandatory purchase requirement also applies to federally insured mortgages, such as mortgages insured by the Federal Housing Administration (FHA). Accordingly, the prudential regulators routinely examine banks for compliance with the FDPA’s mandatory purchase requirement. Despite periodic news coverage implying the contrary, banks overwhelmingly strive to comply with the mandatory purchase requirements for insurance on mortgaged properties. ABA greatly appreciates that the witness for the Independent Insurance Agents and Brokers of America, Christopher Heidrick, noted this fact during the hearing.
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