"This common sense legislation clarifies the intent of Congress that private flood insurance should be an option available to homeowners," says Nat Wienecke, PCI senior vice president, federal government relations.

The issue was first raised by commenters to a regulation proposed last year by federal bank regulators aimed at allowing mortgage banks to accept private flood insurance as an alternative to that provided through the National Flood Insurance Program. The rule was mandated by a provision of the Biggert-Waters Act of 2012.

The commenters, groups representing mortgage banks as well as state insurance regulators, questioned whether existing law allowed them to accept private flood insurance. The issue is still pending.

Heller and Tester explained that, when the National Flood Insurance Act of 1968 was passed, it was Congress' intention that private insurers would provide flood insurance coverage in the United States. Unfortunately, due to a lack of clarity in existing law, lenders have not been accepted private flood insurance as meeting mandatory purchase requirements.

Heller said that S. 2381 would resolve this issue by simply defining acceptable private flood insurance as a policy that provides flood insurance coverage issued by an insurance company that is licensed, admitted, or otherwise approved to engage in the business of insurance in the State or jurisdiction in which the insured building is located, by the insurance regulator of the State or jurisdiction.                                 

"This bill seeks to reassure lenders about the validity of privately issued flood insurance, despite the fact that this insurance has been issued and accepted in the past," Heller said.

SmarterSafer issued a statement in support of the bill's intent: "With the National Flood Insurance Program sinking under $24 billion in debt, we must start finding other means to cover those in harm's way. This bill is a great way to start opening up the flood-insurance market to private insurers, who have more flexibility to offer policies that fit the true level of risk. Letting private insurers step in where NFIP has failed is a commonsense way to protect Americans who rely on flood insurance to keep their homes and families safe. By better informing policyholders of the growing risks they face, this bill will help people make more well-informed and cost-effective choices, ultimately lowering costs and better protecting lives and property."