Congress Passes Flood Insurance Bill

On Thursday, March 13th, the Senate approved a bill passed earlier in the House of Representatives which reverses some reforms to the National Flood Insurance Program passed in 2012 and slows down rate increases for homeowners.

House Resolution 3370, the “Homeowner Flood Insurance Affordability Act of 2013” emerged as the most popular reform package after months of discussion in Congress. This action is in response to reforms passed in 2012 to address the $25 billion deficit of the NFIP. The “Biggert-Waters Flood Insurance Reform Act of 2012” resulted in premium increases of 25% per year for subsidized residential and commercial policy holders, affecting approximately 770 policies in Columbia and Montour counties. If a subsidized property was sold, the premium would increase to the full, actuarially-based rate immediately. Local insurance agents and lenders expressed concern that premium increases of 4x to as much as 10x the prior rates would result in properties becoming non-viable and abandoned.

This legislation, which the President is expected to sign, would repeal the property sales trigger for rate increases. Subsidized premiums could not be increased by FEMA above 15% per year for a certain class of residential properties and above 18% for most primary residence properties. Policyholders that overpaid would receive a refund from FEMA.

Commercial policyholders would not see any relief as a result of H.R. 3370. Premiums would continue to increase 25% per year to the actuarially-based rate for commercial and secondary residence policies. Additionally, to help pay for the more gradual increases in premiums, a $250 annual surcharge would be implemented for these properties. The surcharge for primary residential policies would be $25 annually.

Representative Lou Barletta and Senators Casey and Toomey voted in favor of H.R. 3370. The Chamber has been in communications with the offices of each of these legislators to discuss the implications of rate increases on local communities and to express disappointment that commercial policyholders would be unfairly burdened through this legislation due to the disparity in rate increases and surcharges. Long-term solutions for communities need to include mitigation planning and assistance from the Federal government.

FEMA would be required to complete an affordability study within two years of the bill becoming law and minimize the number of policies with annual premiums that exceed one percent of the total coverage provided by the policy.