Mr. CRAPO. Mr. President, I would like to discuss a provision of the Biggert-Waters Flood Insurance Reform Act of 2012 which reaffirms that private flood insurance can be used to satisfy a mandatory purchase requirement. This provision defines the term ``private flood insurance,'' and the definition makes a specific reference to private flood insurance from a surplus lines insurer in connection with nonresidential commercial property coverage. I would note, however, that insurance provided by surplus lines insurers also can cover residential properties--particularly when licensed and admitted insurers are unwilling or unable to provide the desired coverage--and this is authorized under state insurance law. The provision defines private flood insurance to include insurance provided by an insurer ``licensed, admitted, or otherwise approved'' to engage in the business of insurance by a State. Surplus lines insurers, also sometimes known as nonadmitted insurers, are approved to conduct such business by States. Is it the understanding of the Chairman that the ``private flood insurance'' definition includes surplus lines flood insurance coverage?
Mr. JOHNSON. I thank the Senator from Idaho for his question. The answer is yes--the definition of ``private flood insurance'' includes private flood insurance provided by a surplus lines insurer and is not intended to limit surplus lines eligibility to nonresidential properties. While the Senator is correct that surplus lines insurance is specifically mentioned in that context, overall the definition accommodates private flood insurance from insurers who are ``licensed, admitted, or otherwise approved'' in the State where the property is located.
Mr. CRAPO. I thank my friend from South Dakota for this important clarification. This is an important issue, particularly in those limited high-risk areas where surplus lines insurance serves as an essential part of the homeowners insurance market. I agree with his reading of the statute, because state law already sets the parameters as to when surplus lines insurance is acceptable.