The Independent Insurance Agents & Brokers of America (IIABA) is applauding approval of flood insurance reform legislation by a House committee that will reportedly extend the program for five years and institute mitigation activities for the worst repetitive-loss properties.
The House Financial Services Committee approved the Two Floods and You Are Out of the Taxpayers’ Pocket Act (H.R. 253) during a markup this week. The measure was sponsored by Rep. Doug Bereuter (R-Neb.), who introduced the measure earlier this year.
Going into the markup, IIABA had concerns that the mitigation provisions in the bill would force too many homeowners out of the National Flood Insurance Program (NFIP).
As introduced, H.R. 253 would have authorized the Federal Emergency Management Agency (FEMA), the federal agency that oversees the NFIP, to offer mitigation to all properties that have had four or more flood losses of $1,000 or more per flood over the life of the property. If the homeowner refused mitigation, FEMA could have charged them actuarially derived higher rates and they would be ineligible for federal disaster assistance following a flood.
“We believe the original bill would have led to too many homeowners losing their shield of protection afforded by flood insurance,” said IIABA Director of Federal Government Affairs Justin Roth. “For example, a family that lives in a house for 40 years and experiences a minor flood with minimal damage every 10 years would be targeted by the proposal and could have been forced to pay prohibitively high rates or possibly dropped by the NFIP.”
To address its concerns, IIABA worked with Capital Markets, Insurance and Government Sponsored Enterprises Subcommittee Chairman Richard Baker (R-La.) and Bereuter on a compromise amendment that would meet the twin goals of lowering exposure from repetitive-loss properties while ensuring that access to flood insurance coverage was available to all who need the protection, according to Roth.
The amendment, offered by Baker and approved unanimously by the committee, will permit FEMA to target properties that prior to the bill’s enactment had four or more flood claims exceeding $5,000 per claim. For losses that occur following the bill’s enactment, FEMA will target only properties that have four or more new claims exceeding $3,000 per claim. IIABA believes that raising the threshold will help FEMA target the worst repetitive-loss properties.
“IIABA understands the need for reform, but we also believe that only the real abusers of the flood insurance program should be targeted,” said Roth. “The compromise adopted by the Financial Services Committee will ensure that most homeowners will continue to have access to important flood insurance protection and give the NFIP the ammunition to go after those who are truly a drain on the system.”
To remain eligible for lower flood insurance premiums and federal disaster assistance, H.R. 253 would require owners of repetitive-loss properties to accept mitigation activities—such as buyouts, elevation of the structure, or other flood mitigation measures—funded by FEMA through the National Flood Mitigation Fund. The legislation would earmark an additional $20 million for mitigation activities each year through 2008.
“Instead of a punitive approach forcing homeowners to pay a large share of the remediation expenses, H.R. 253 provides the financial means to make properties more resistant to flooding or move them from the flood zone entirely,” continued Roth. “This will make a world of difference in helping persuade repetitive-loss property owners to accept FEMA’s mitigation determinations. It is, as the old adage goes, putting your money where your mouth is.
“IIABA commends Rep. Baker for his strong advocacy and his tireless work on the flood program. His compromise amendment is key to ensuring a comprehensive and fair program that also will bring about real and needed reform. We also recognize Rep. Bereuter for his long-time work on this issue, and the leadership of Rep. Bob Ney (R-Ohio) in shepherding this legislation through the Financial Services Committee,” said Roth. “Through the dedication and leadership of Reps. Baker and Bereuter, we have legislation that will result in real reform while serving the needs of America’s homeowners. The Baker amendment is very important for independent agents and our homeowners clients around the country.”
The NFIP was established by Congress in 1968 to provide flood insurance protection to the nation’s homeowners, who previously could not acquire such coverage through the private sector and had to rely on government assistance following a flood disaster.
The program was last reformed in 1994 through the National Flood Insurance Reform Act. Currently, the NFIP must be reauthorized on an annual basis by Congress, but that would reportedly change with the enactment of H.R. 253, which would extend reauthorization for five years through 2008.