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House approves legislation to reauthorize flood insurance program

Although the U.S. House of Representatives and the U.S. Senate remain at odds over how to advance legislation that would reauthorize the National Flood Insurance Program (NFIP), the House on November 14 approved their measure by a vote of 237-189 along party lines.

The legislation, titled the 21st Century Flood Reform Act (H.R. 2874), combines a series of bills that, in addition to reauthorizing the NFIP, would bring about considerable reforms to the program. Some of the proposed reforms could raise premium rates for flood insurance policyholders and make insurance less affordable for homeowners. As lawmakers respond to the aftereffects of this year’s severe storms, some hesitated to attach controversial reforms to a must-pass reauthorization bill, which the White House had urged Congress to consider earlier this year.

The NFIP is currently operating under a temporary extension in the form of a Continuing Resolution (H.R. 601) that will expire on December 8 if Congress does not act. Facing a busy congressional calendar, the House may have to pass an additional short-term funding extension through the end of December until a longer-term package is approved.

H.R. 2874 is expected to include the following provisions:

  • Reauthorize the NFIP for five years, from its December 8, 2017 expiration through September 30, 2022;
  • Lower the annual cap on premium increases from 18 percent to 15 percent;
  • Create a new flood insurance affordability program that allows states to subsidize premiums for low-income policyholders;
  • Require property owners to disclose any known flood damage prior to selling or renting a property; and
  • Direct the Federal Emergency Management Agency (FEMA) to provide a mitigation credit for home owners that have made improvements to their property to reduce the impact of flood damage.

The bill would also enact new reporting requirements for FEMA, which would require the agency to disclose to policyholders the formula used to determine insurance rates and provide property owners with information on flood risk and previous claims. Important to note for counties, the bill would create a new voluntary Community-Based Flood Insurance Pilot Program, which would allow local governments to purchase flood insurance for a portion of properties within their jurisdiction or for all of them;

The bill also contains several provisions of concerns to policyholders, including:

  • An increase in the threshold of premium increases from 5 percent to 6.5 percent, meaning whenever rates increase for policyholders, they would do so at no less than 6.5 percent; this represents an increase from what is currently authorized under federal law;
  • The cap on annual premiums is set at ten thousand, which could limit affordability of the program to homeowners, and decrease the overall risk pool; and
  • The implementation of a $25-250 surcharge for policyholders who elect to make monthly installments on their annual premiums.

During a November 13 hearing in the House Rules Committee about the bill, Rep. Garret Graves (R-La.) voiced concerns with the legislation, which he said did not adequately address the long-term solvency of the NFIP or the program’s leftover debts from the costs incurred by superstorms such as Hurricanes Sandy and Katrina. Rep. Graves also argued that much of the NFIP’s $24 billion in debt was a result of levee failures, and not due to a lack of coverage among property owners in New Orleans, who could face higher premiums that would go toward paying off the program’s debts.

The measure will still be subject to consideration in the U.S. Senate, which remains divided on significant issues with the NFIP, such as the program’s long-term solvency and premium increases for policyholders.

Although NACo applauds lawmakers’ efforts to reauthorize the NFIP and implement reporting standards that are beneficial to homeowners, counties remain concerned with proposals that could make flood insurance less affordable, especially at a moment when communities across the country are still engaged in recovery efforts. NACo remains committed to working with lawmakers in the House and Senate on legislation that would provide disaster mitigation funding to local communities, particularly in high risk areas, as well as provisions that provide additional funding to FEMA to update flood insurance risk maps which would help encourage property owners at a high risk of flood damage to purchase flood insurance.