South Carolina Looks to Boost Private Flood Market Through New Law

The state of South Carolina is aiming to foster new flood insurance coverage options through the enactment of the South Carolina Private Flood Insurance Act.

South Carolina Gov. Henry McMaster signed the legislation, passed Sept. 23 by state lawmakers, into law Sept. 28. The law, which takes effect Nov. 28, 2020, will provide insurers “the ability to test products in the market and thus give consumers greater choice for flood insurance coverage,” according to the legislation.

The main provisions in the act include:

• Recognizing the various forms of private flood insurance available today — those meeting National Flood Insurance Program (NFIP) standards.
• Discretionary acceptance policies and any other type of coverage that covers losses resulting from flood.
• Streamlining the regulatory oversight of forms and rates for private flood insurance coverage; allowing additional underwriting flexibility
• Requiring 45 days’ notice before a private flood policy is canceled or nonrenewed

The act states that private flood policies must be standard, covering only flood losses at least equivalent to those provided under a standard policy from the NFIP.

Policy forms must also include:

• Information about the availability of flood insurance under the NFIP;
• A mortgage interest clause substantially similar to the clause contained in a standard flood insurance policy under the NFIP;
• A provision requiring an insured to file suit no later than one year after the date of a written denial of all or part of a claim under the policy;
• And cancellation provisions that are as restrictive as the provisions contained in a standard flood policy under the NFIP.

Nonstandard flood insurance may also provide coverage designed to supplement a flood policy obtained from the NFIP or an insurer issuing standard flood insurance. South Carolina Department of Insurance Director Ray Farmer said the new law provides the insurance industry with some flexibility for a “small, but important line of coverage.”