The $1.1 trillion government funding agreement unveiled by Congressional negotiators on Monday includes language to postpone for about eight months some of the flood insurance rate hikes triggered by reforms passed in 2012.
But the budget language does not go as far as hoped by some lawmakers who want to delay most of the rate hikes caused by the Biggert-Waters Flood Insurance Reform Act for much longer — up to four-years.
The budget agreement is expected to be voted on by Wednesday night, when the government’s current spending authority expires.
The budget language on flood insurance would reportedly block the Federal Emergency Management Agency (FEMA) from spending any money for the remainder of this fiscal year (through Sept. 30, 2014) to enforce higher premiums under Section 207 of Biggert-Waters. This section ends current “grandfathered” subsidized rates for existing policyholders who are now facing premium increases due to remapping. These properties were built in accordance with building codes at the time of construction but are now considered to be out of compliance due to new flood maps.
A Senate bill (S.1846) to effectively delay the 2012 reforms for four years was expected to be taken up this week but was sidetracked by the Senate debate over unemployment insurance. The Senate bill is sponsored by Sen. Robert Menendez, D-N.J., and has 21 Democratic and 8 Republican co-sponsors.
According to Sen. Bill Nelson, D-Fla, it’s unclear how many homeowners would be helped by the budget measure. He said one estimate is that less than 25 percent of flood policies affected by Biggert-Waters would benefit.
FEMA estimates that about 20 percent of its 5.5 million policyholders — about 1.1 million — receive subsidies. Under Biggert-Waters, about 250,000 of them will see immediate increases: business owners, those owning second homes and people with frequently flooded properties. Neither the budget language nor the Senate bill would delay these increases.
An additional 578,000 policyholders living in hazardous areas will retain their subsidies until they sell their homes or suffer severe, repeated flood losses. The budget provision does not change this provision but the Senate bill would block increases triggered by the sale of a home.
The budget language was put forth by two Louisiana officials — Sen. Mary Landrieu (D) and Rep. Bill Cassidy (R)— who are competing against each other in a Senate race in their home state but who agree on delaying the flood insurance changes.
Because legislative leaders from both political parties have agreed to the budget plan, Nelson said a majority of lawmakers from both sides of the aisle should now support the measure this week.
But those seeking a broader and longer delay of Biggert-Waters still have work to do.
“We’ve accomplished a small step toward the solution of the huge flood insurance hikes, but we still have a long way to go. Less than a quarter of the policies, the rate hikes have been avoided,” said Nelson. “But in order to eliminate the rate hikes for the next three years, until we can do an affordability study, we have to pass the bipartisan bill. We’re getting partisan resistance. My hope is that everybody will see that this is absolutely necessary to delay the rate hikes.”
“During the delay, the Federal Emergency Management Agency and Congress need to go back to the drawing board for a permanent fix to ensure that our neighbors and small business owners do not suffer unconscionable increases,” Rep. Kathy Castor, D-Tampa, said in a release.
The Biggert-Waters act, which passed both houses in 2012 by wide margins, is an attempt to address the $24 billion deficit of the National Flood Insurance Program (NFIP) and place the program on sounder financial footing. Under the law, premiums subsidies are to be phased out and new flood maps drawn.
The CBO estimates that the Senate bill to delay the reforms would reduce net income to the debt-ridden NFIP by about $2.1 billion over the 2014-2024 period.
According to Nelson, Senate Majority Leader Harry Reid (D-Nev) is supporting the broader, longer delay in flood insurance rates.
In addition, the four-year delay has picked up a major industry backer. The Independent Insurance Agents and Brokers of America (the Big “I”), an influential lobbying group, has come out in favor of the delay. Landrieu wasted no time in touting the Big “I” endorsement, writing in an editorial for houmatoday.com:
“Every day, our coalition to fix the Biggert-Waters flood reform bill grows stronger and deeper. Today’s support from the Big ‘I’ sends a clear message from insurance agents and brokers that we must act quickly to achieve our shared goal of making flood insurance self-sustainable and affordable for middle class, hardworking homeowners who have played by the rules. They cannot wait any longer.”
Some insurers that criticized the four-year delay as too broad are also criticizing the flood insurance provision in the budget deal for not targeting relief to those in need.
“Any delay to the reforms approved by Congress in the Biggert-Waters Act of 2012 only serves to put the taxpayers at risk if having to again bail out the National Flood Insurance Program should a major flood occur during the spring thaw or the 2014 hurricane season,” said Jimi Grande, senior vice president, Federal and Political Affairs, National Association of Mutual Insurance Companies (NAMIC).
His group has called on Congress to target any fix to low-income policyholders rather than gutting most of the reforms.
The House has a proposal that would delay rate increases for only six months. This bill (HR 3370) has 117 Democratic and 51 Republican co-sponsors but faces opposition from key Republicans including Rep. Jeb Hensarling (R-Texas), who chairs the House Financial Services Committee that has jurisdiction over flood insurance.