The Washington-based SmarterSafer, a coalition that promotes environmentally responsible, fiscally sound federal policies, said the major obstacle to private sector flood insurance has not been regulation but rather the inability of private carriers to compete with the subsidized premiums offered by the NFIP.

The current mandatory purchase requirement does not require that the insurance coverage be provided under the NFIP, however, mortgage lenders have said they are uncertain that private flood coverage satisfies current regulations and have mostly only accepted NFIP policies. Thus the bulk of the business is written with NFIP, according to SmarterSafer.

The legislation defines as acceptable a policy issued by a private insurance company that is licensed, admitted or otherwise approved in the state in which the insured property is located, the group said. A policy issued by a non-admitted insurer, one that hasn't been approved by a state's insurance department, would also qualify.

The insurance industry is pleased with the recent vote.

“The National Association of Professional Insurance Agents commends the House Financial Services Committee for passing the Flood Insurance Market Parity and Modernization Act (H.R. 2901), in a bipartisan vote. The bill seeks to encourage the development of a private Flood insurance market with strong consumer protections being overseen by state insurance regulators,” said Jon Gentile, vice president of government relations for the Alexandria, Va.-based National Association of Professional Insurance Agents.

“While PIA opposes outright, immediate privatization of the National Flood Insurance Program, PIA supports sensible solutions for growing the private flood insurance market,” he said.

Robert Hartwig, president of the New York City-based Insurance Information Institute, agreed:

“The Flood Insurance Market Parity and Modernization Act, passed this week by the House Financial Services Committee, is a major step forward not only for consumer choice but also constitutes progress in enhancing the the financial integrity of the NFIP while at the same time protecting taxpayers,” he said. “Private insurers appreciate the protection the Act affords them by guaranteeing parity with NFIP policies while at the same time preserving the NFIP to fulfill its vital role. Advances in the science and modeling of flood risk, combined with ample capital in primary and secondary markets, combined with the looming NFIP reauthorization in 2017, make 2016 a propitious moment to enhance access and choice in the nation's Flood insurance markets.”

Gentile said the PIA has been working with members of Congress to advance the legislation. A companion bill, S. 1679, introduced by Senator Dean Heller (R-Nev.), awaits action.