A unit of the National Association of Insurance Commissionershas modified a portion of its mega-catastrophe plan that deals withflood risk.

Florida Commissioner Kevin McCarty, who chairs the CatastropheInsurance Working Group, said that flood coverage would no longerbe a mandated coverage in a proposed all-perils catastrophe policybut improved through reform of the National Flood InsuranceProgram.

The NAIC program consists primarily of state and federal fundbackstops for natural catastrophe mega-risk insurance losses and aseries of provisions encouraging loss mitigation.

McCarty introduced the plan at the annual winter meeting lastmonth and hopes to gain approval at the spring session inMarch.

Property-casualty trade group representatives had taken aim atthe program for calling on the industry to cover flood risk, whichhas been the province of the federal government for nearly fourdecades. Concerns have been raised from insurers' organizationsabout many aspects of the backstop proposal, which has strongbacking from leading personal lines insurers Allstate and StateFarm.

McCarty said flood risk was added at the behest of Gulf Stateregulators whose electorate includes many uninsured residents whohave lost their homes to hurricanes and resultant flooding.

Flood coverage efforts, he said, will now center on revampingthe federal program and providing stricter language spelling outthe coverage homeowners policies provide, and more importantlydon't provide.

“Many people were misled into believing they did not need toobtain flood coverage,” McCarty said.

Loss mitigation incentives and mandates will remain a criticalpart of any catastrophe plan, McCarty said.

Nebraska regulator Allan Wickham said such incentives should gobeyond premium credits, but he did not specify what he wouldadd.

This article originally appeared in The National UnderwriterP&C. For the complete article, please click here.