APCIA addresses flood protection gap and TRIA

The protection gap in the US remains a key issue for the American Property Casualty Insurance Association (APCIA); as such, it is focused on certain risks that are traditionally underinsured, such as flood, as well as securing the best outcomes for structures that help manage certain risks including the Terrorism Risk Insurance Act (TRIA).

Nat Wienecke, senior vice-president of federal government relations at the APCIA, told APCIA Today that a fundamental challenge facing US insurers is that many consumers still regard insurance as an unnecessary expense instead of understanding its value.

This is part of the reason for such a wide protection gap on many risks. Wienecke said flood insurance in the US is a prime example of this challenge. He noted that when Hurricane Harvey hit Texas it quickly became apparent that a majority of people affected by that storm had no flood insurance.

“There are a number of reasons for that,” he said. “One is the antiquated way that the government thinks about risk. If you are inside a flood zone, you must buy flood insurance if you have a mortgage. But if you’re six feet outside of that one-in-10 flood zone, most people don’t buy flood insurance.

“Another reason is that many people misunderstand the concept of a one-in-100-year risk or whatever it is. People will say: ‘This property flooded 20 years ago; I’ve got 80 years before the next flood’. But the biggest protection gap is for people outside those flood-prone zones.”

He admits this issue is, in part, a public policy matter; it can be tricky for governments to force people to buy insurance, as the recent healthcare reforms in the US proved.

Meanwhile, TRIA is set to expire at the end of 2020. Wienecke said that APCIA is pressing Congress to get the act reauthorised and pushed through before the start of 2020. This is partly to avoid any disruption to insurance policies likely to be in force after this expiry date and partly because 2020 will be a very busy year politically given the presidential election.

As things stand, a bill legislating for a 10-year extension has been introduced in the House of Representatives by Maxine Waters, chair of the House Financial Services Committee.

Wienecke is hoping for a straightforward reauthorisation. “This is an issue where the policyholder community and the insurance community are on the same page there’s no daylight between the reinsurers, the primary insurers and the policyholders,” he said.

“The programme works well. The Treasury report issued roughly 18 months ago essentially said that the market is in equilibrium. It’s available, it’s affordable, it’s being utilised, and we think that that’s a great thing.

“We support, along with our policyholders, a clean extension of the programme, with no major changes, for as long as possible.”