New legislation extends the National Flood Insurance Program until Sept. 30, 2017 and introduces various reforms. The reforms were put in place with one main goal in mind: to bring more financial stability to the program. Here are 10 of key provisions of the new program:
1. Redefines wind versus water: Allows for the creation of a collaborative NOAA and FEMA data share and engineering formula development to more accurately assess the cause of water damage in hurricane situations.
2. Requires a debt repayment action plan: The NFIP administrator is now required to outline a debt repayment plan for the $18 billion in Katrina-related debt.
3. Requires action on business interruption/additional living expense coverage: Charges the General Accountability Office with studying how the NFIP can address these excluded areas of loss.
4. Introduces a reinsurance option: The plan allows for FEMA to enter the reinsurance market, thus transferring a portion of the risk to the private sector.
5. Prohibits subsidized rates extension: Applies to policies that lapsed due to policy holder choice. Now these subsidized properties will be charges at a rate that equals the rates for the area in which the policy is located. Most notably, subsidies for repetitive-loss properties will disappear.
6. Sets higher premium caps: Now set at 20 percent, 10 percent over last year’s cap.
7. Raises the minimum deductible: The new program increases residential minimum deductibles to $2,000, $1,000 higher than last year.
8. Introduces coverage for multifamily dwellings: Previously excluded from coverage.
9. Establishes a technical map advisory council: Creates a committee to put into place a map modernization process.
10. Allows for private insurance in lending situations: Provides language that allows lenders to accept private flood insurance on a mortgage application.