Flood Insurance Program Gets Three-Month Extension

The major changes Congress has in mind for the National Flood Insurance Program are still on the table, as both the House and Senate voted to extend the program as is for only three months to allow time to hammer out an agreement. President Bush is expected to sign the measure, which was passed two days before Thanksgiving.

The bill, S. 1768, simply reauthorizes the act first passed in 1968 through March 31, 2004. Only days before the House of Representatives had voted 352-67 to approve HR 253, a reform bill whose earlier title, the “Two Floods and You Are Out of the Taxpayers’ Pocket Act of 2003,” should give one an inkling of its substance.

However, there was not enough time to deliberate on the bill in the Senate, which is why the temporary reauthorization was passed as a placeholder. Industry representatives were pleased with the measure but stressed the need for a longer-term reauthorization.
“Avoiding a lapse in the NFIP is a success this year,” said Carl Parks, a lobbyist for the National Association of Independent Insurers, in a statement. “With only a temporary extension expected in a final bill, it will be necessary to revisit reauthorization next year when Congress reconvenes. Ultimately, we must get away from short term extensions and bring stability to the program.”

Agent groups expressed similar sentiments.

“This will hopefully give the Senate time to hold hearings on legislation previously passed by the House that both extends and reforms the flood insurance program,” said Peter Bizzozero, a Professional Insurance Agents lobbyist, in a statement. “Our first priority was to ensure a seamless reauthorization of the program because our members and their clients depend on the uninterrupted availability of flood insurance coverage to protect their homes and businesses.”

HR 253, introduced by Reps. Doug Bereuter (R-Neb.) and Earl Blumenauer (D-Ore.), originally called for making ineligible for NFIP coverage any properties for which more than one claim of at least $1,000 each had been made in a 10-year period. The property owner would then be forced to either accept an NFIP buyout or assistance to mitigate the likelihood of another claim.

NFIP, which covers 4.4 million policyholders, says that repetitive-loss properties cost about $200 million annually. Though they account for only 1 percent of insured properties, they are expected to total 25 percent to 30 percent of claims losses.

The compromise bill, which won House approval was engineered by Bereuter and Rep. Richard Baker (R-La.) and called for reauthorization of the program and a five-year pilot mitigation program. It also altered the definition of repetitive-loss properties to only capture the most severe examples, affecting fewer policyholders.

“The elements of comprehensive legislative reform embodied in HR 253 will serve as a good basis for action during the next session,” PIA’s Bizzozero said.

“This is a good compromise for homeowners and for the companies which indemnify them should a homeowner suffer a loss from a covered peril,” said Marliss A. Browder, federal affairs representative for the National Association of Mutual Insurance Companies.

HR 253 sets out an explicit definition of what counts as severe repetitive-loss property for single-family homes, but leaves multi-family properties to the discretion of the NFIP bureaucracy.

Instead of the earlier bill’s two strikes and you’re out principle, the compromise bill defines a severe repetitive-loss property as any single-family home of up to four units that has received four or more claims payments of more than $5,000 each and more than $20,000 total. Also classified as a severe repetitive-loss property under the bill is any home that has received at least two payments for claims exceeding the value of the property.

Once the bill is passed, the bar for action would be lowered to four or more claims payments of $3,000 or more or exceeding $15,000 total.

A property that fits the bill would then have to be mitigated to reduce flood damages by elevation, relocation or if necessary demolition or face up to a 150 percent premium increase. If none of these is an option, the homeowner would be forced to accept an offer for the fair-market value of the home from the NFIP.

The House bill also calls for doubling the NFIP’s funding to $40 million a year.

The previous session of Congress adjourned without reauthorizing the flood insurance program, setting off worries in the industry and among homeowners about its fate. Congress retroactively reauthorized it for another year when returning to session in Jan. 2003.

Topics Legislation Flood Property Homeowners