ABIR Backs US Flood Insurance Draft Bill
Association of Bermuda Insurers & Reinsurers president Bradley Kading has told the National Underwriter Online News Service the local industry backs proposed Congressional legislation which could partially privatise the US Federal flood insurance programme.
“Reinsurers want to write some risk in the programme, and we think policymakers want to use reinsurance to reduce future debt obligations,” he told the industry news outlet yesterday [Mar. 8].
Mr. Kading said the Bermuda industry supports provisions in a draft Congressional bill that would allow private reinsurers to take on National Flood Insurance Programme risk.
One provision of the draft bill says that within 18 months, the US Federal Emergency Management Agency [FEMA] should conduct studies on privatising the NFIP and make reports to Congress on the issue.
Mr. Kading said offshore insurers and reinsurers have talked to Rep. Judy Biggert, chair of the Insurance, Housing & Community Opportunity sub-committee of the US House of Representatives Financial Services Committee, which will hold a hearing on the issue Friday [Mar. 11] about creating a role for private insurance and reinsurance in the NFIP.
“We have suggested use of insurance and reinsurance to Rep. Biggert, and others have also, including FEMA,” Mr. Kading said.
“But, they are considering a wide range of options to reduce the risk to taxpayers.”
He acknowledged that there has been some pushback to proposals by offshore insurers to carve out part of the flood insurance risk but not to reinsure.
“Most of the industry trade groups have said they don’t support privatisation of direct writing of flood risk insurance,” Mr. Kading said.
He said direct writing by Bermuda insurers would be “an experiment.”
“We really can’t agree to underwrite the risk until we look at FEMA data,” Mr. Kading said. “We write flood risk elsewhere, we sell reinsurance on commercial flood risk in the US, and we sell direct insurance in other countries.
“So there is appetite for this risk among international reinsurers,” he said
Using private reinsurance could reduce the burden of the National Flood Insurance Programme on American taxpayers, both ABIR and the Reinsurance Association of America have argued in recent months.
Last month ABIR petitioned Congressional leaders in both the US House of Representatives and the Senate, objecting to provisions in President Obama’s 2012 budget which would deny tax deductions to affiliates of American insurers based in Bermuda and other overseas business jurisdictions.
