The Washington state Senate today approved House Bill 2560, which would allow the insurance commissioner to create a market assistance plan and, if necessary, a "joint underwriting association" if the flood insurance market in Washington's Green River Valley collapses.
Last fall, the Army Corps of Engineers said that a weakened abutment to the Howard Hanson Dam meant that the Corps might have to release substantially more water than usual through the dam for the next few years. As a result, the risk of flooding in the valley below was for a time said by the Corps to be as high as 1 in 3. (Now, after significant work on the dam, the Corps says the risk has been reduced to 1 in 33.)
As a result, many businesses in the flood plain last fall reported major difficulties in finding flood coverage to insure above the National Flood Insurance Program's maximum: $500,000 for a commercial building and $500,000 for contents. Many businesses in the heavily industrialized area have more at risk than that, particularly if one factors in business-interruption losses.
In response, state insurance commissioner Mike Kreidler requested legislation giving him the authority to create a market assistance plan -- a sort of match-making service between people seeking insurance and those selling it -- and allowing for the creation of a Green River Valley JUA.
Insurers might be required to participate in the market assistance plan. If that doesn't ease the crisis, the next step would be a joint underwriting association. Known as JUAs, these serve as a publicly-organized insurer of last resort when an insurance market collapses. The insurance wouldn't be cheap -- the underwriting still has to be actuarially sound, with a $5 million maximum per policy -- but at least it would be available for businesses desperate to mitigate their risk. (The JUA insurers' liability is also capped at $250 million.)
The bill passed the House last month, and Sen. Jean Berkey led the floor action as the Senate passed it Tuesday, 28-17. (See video below.) It now goes to Gov. Chris Gregoire.