The U.S. House of Representatives has scheduled a vote on legislation to provide consumers relief from exorbitant spikes in National Flood Insurance Program (NFIP) insurance premiums. The House will take up an amended version of H.R. 3370, the “Homeowner Flood Insurance Affordability Act (HFIA)” under expedited procedures on Wednesday, February 26th. Expedited procedures in the House require that legislation receive a supermajority vote (two-thirds) to clear the chamber.
The House HFIA amendment (see summary below) ensures that homeowners are protected from unreasonable increases in flood insurance premiums by amending and repealing parts of the federal law known as the Biggert-Waters Act that set the premium increases in motion. Earlier this year, the U.S. Senate voted overwhelmingly to delay Biggert-Waters Act premium increases until a study on how premium spikes affect consumers is completed.
Under the House HFIA amendment owners whose property was built in compliance with local building and floodplain management codes in force at time of construction will be protected from flood insurance premium spikes when a new flood map for the area is released. Additionally, Biggert-Waters Act provisions requiring significant premium increases when a property has been sold are repealed.
To ensure that future premium increases are implemented in an affordable manner, the House HFIA amendment establishes a minimum and maximum premium increase structure for non-actuarially priced flood insurance policies. Under this system, premiums for non-actuarially priced policies must increase by an average of 5 percent from the previous year, but in no circumstance may be increased by more than 15 percent of the previous year. At no time will a policy holder be charged a rate that exceeds the full risk, actuarial premium rate.
To ensure the NFIP builds sufficient cash reserves to protect American taxpayers, the House HFIA amendment establishes an annual surcharge for all non-actuarially priced flood insurance policies. The annual surcharge for non-actuarially priced residential flood insurance policies will be $25 while the annual surcharge on similar policies for non-residential property or non-primary residences will be $250. Surcharges will be suspended once a policy’s premium equals the full risk, actuarially sound premium rate. All surcharge proceeds are dedicated to the NFIP’s reserve fund, which was created through the Biggert-Waters Act.
If you have any questions or comments regarding the House amendment to H.R. 3370 or changes to federal flood insurance, please contact CAI Government Affairs at government@caionline.org or (888) 224-4321.
CAI Government Affairs represents the interests of the 62.5 million people living and working in America’s community associations on legislative and regulatory issues at the local, state, and federal level of government.
Homeowner Flood Insurance Affordability Act (as amended)
U.S. House of Representatives
Section 1. Short title and table of contents.
Section 2. Definitions.Defines “Administrator” and “National Flood Insurance Program”.
Section 3. Repeal of certain rate increases.Repeals 5-year phase-in of actuarial flood insurance premiums for insured structures in areas subject to a revised flood insurance rate map.
Permits grandfathered flood insurance premiums for previously insured structures if flood insurance coverage was dropped due to a determination the property was no longer in a special flood hazard area.
Requires the NFIP to prepare and implement new flood insurance rate tables as if the Biggert-Waters Act 5-year phase-in of actuarial rates did not become law. Regulations and new rate tables required by this section shall be published in theFederal Register with a public comment period of no less than 45 days.
Requires the NFIP to refund any excess premiums collected from insureds if, after implementation of a revised flood insurance rate table, there is a difference between the amount of the initial premium paid and the revised premium.
Directs the NFIP to permit the assumption of a flood insurance policy by the purchaser of a property if, at the time of purchase, the property is covered under an existing NFIP flood insurance policy.
Section 4. Restoration of grandfathered rates.Amends Section 1308 of the National Flood Insurance Act to restore grandfathering of flood insurance rates by removing the requirement that NFIP charge full actuarial flood insurance rates for policies where it is determined that current premiums do not reflect the full risk, actuarial rate.
Section 5. Requirements regarding annual rate increases.Directs that NFIP increase flood insurance premiums annually by at least 5 percent from the previous year, while limiting the maximum annual premium increase to no more than 15 percent of the previous year’s premium. Provides that at no point may a policy’s premium exceed the full-risk, actuarial premium rate.
Section 6. Annual premium surcharge.Establishes an annual premium surcharge of $25 for non-actuarially priced residential policies and a $250 annual surcharge for non-residential or non-primary residence policies. Premium surcharges are suspended when policy premiums equal the estimated full-risk, actuarial premium rate. Premium surcharges are to be deposited in the NFIP’s reserve fund.
Section 7. Draft Affordability Framework.Requires FEMA to prepare a draft affordability framework to address affordability issues delineated in the affordability study required under the Biggert-Waters Act.
Section 8. Risk transfer.Permits FEMA to obtain reinsurance from private reinsurers or the capital markets to ensure the NFIP has sufficient resources to pay claims.
Section 9. Monthly installment payment for premiums.Permits payment of flood insurance premiums on monthly or other installment plans.
Section 10. Optional high-deductible policies for residential properties.Directs the NFIP to establish and offer a high deductible flood insurance policy with a maximum annual deductible of $10,000. Establishes consumer disclosure requirements for high deductible polices that clearly state the responsibility of the consumer to assume all out-of-pocket expenses short of the policy deductible.
Section 11. Exclusion of detached structures from mandatory purchase requirement.Provides that detached, non-residential structures shall not be the basis for enforcing a mandatory flood insurance purchase requirement.
Section 12. Accounting for flood mitigation activities in estimates of premium rates.Directs that NFIP take into account flood mitigation measures taken by property owners or lessees to reduce flood risk when estimating flood insurance premiums.
Section 13. Home improvement fairness.Increases the home improvement threshold from 30 percent of value to 50 percent of value for the purposes of enforcing actuarial premium requirements.
Section 14. Affordability study and report.Amends the Biggert-Waters Act affordability study to include additional study items while establishing a 2-year study completion deadline and increasing study funding from $750,000 to $2 million.
Section 15. Flood insurance rate map certification.Directs FEMA to implement a revised flood mapping system that will produce credible flood hazard data.
Section 16. Funds to reimburse homeowners for successful map appeals.Permits FEMA to use funds from the NFIP to reimburse homeowners who successfully appeal a flood insurance rate map determination.
Section 17. Flood protection systems.Requires FEMA to certify flood protection systems meet the adequate progress standard if, based on the existing value of the flood protection system—
· 100 percent of the system’s cost has been authorized
· At least 60 percent of the system’s cost has been appropriated
· At least 50 percent of the system’s cost has been expended, and
· The system is at least 50 percent completed
Requires that FEMA take into account all sources of flood control protection system funding, including federal, state, and local funds when making an adequate progress determination.
Provides that the amended adequate progress standard applies to levee systems being reconstructed/restored to a level that once completed will again offer 100-year flood protection.
Section 18. Monthly reports regarding Reserve Fund ratio.Directs the NFIP to report monthly on the status of the Reserve Fund.
Section 19. Treatment of floodproofed residential basements.Directs FEMA to continue to insure certain residential basements that meet specified federal regulations in effect as of April 3, 2009.
Section 20. Exemption from fees for certain map change requests.Exempts parties requesting a change in a flood insurance rate map if the change is the result of a federally or state funded habitat restoration activity that may include dam removal, culvert redesign or the installation of a fish passage.
Section 21. Study of voluntary community-based flood insurance options.Directs FEMA to study voluntary community-based flood insurance policies and to determine how such policies would affect communities based on a variety of criteria.
Section 22. Designation of flood insurance advocate.Establishes the office of Flood Insurance Advocate, whose primary responsibilities include educating policy holders and property owners on flood risks, flood mitigation, and flood insurance rate map update and challenge processes; educating local community leaders impacted by proposed revisions to flood insurance rate maps; and helping policy holders obtain accurate flood insurance rate information.
Section 23. Exceptions to escrow for flood insurance payments.Provides that lenders and mortgage servicers do not need to escrow flood insurance premiums in cases where a community association pays flood insurance premiums as a common expense. Repeals the mandatory 2-year delay in escrow of flood insurance premiums.
Section 24. Flood mitigation methods for buildings.Directs FEMA to develop flood mitigation guidelines for properties that are not candidates for elevation due to structural characteristics of the properties. FEMA is directed to inform owners of such properties how implementing non-elevation mitigation solutions will affect NFIP premiums.
Section 25. Mapping of non-structural flood mitigation features.Requires that flood insurance rate maps take into account non-structural flood mitigation features and directs that FEMA coordinate with state and local units of government to identify such features.
Section 26. Authority of States to regulate private flood insurance.Preserves the authority of states to regulate flood insurance policies issued by private insurance companies.
