Senators’ Flood Insurance Measure Includes Premium Cap, Mitigation, Claims Reforms

July 17, 2019

A bipartisan group of U.S. senators from coastal states — including three running for president– unveiled a comprehensive flood insurance reform measure they see as an alternative to measures recently passed by a House committee.

The Senate proposal, which builds on previous ideas considered by lawmakers, would, among other reforms, cap premium increases at 9 percent a year; offer means-tested vouchers as financial assistance to low- and middle-income families; require claims be processed within set deadlines; invest more in mitigation; limit private insurers’ profit; improve mapping and agent training; and institute various other management reforms.

The measure would reauthorize the National Flood Insurance Program (NFIP), which is set to expire Sept. 30, for five years.

The measure — The National Flood Insurance Program Reauthorization and Reform Act of 2019 (NFIP Re) — was unveiled at a press conference by Senator Bob Menendez, (D-N.J.), who is a senior member of the Senate Banking Committee that oversees the NFIP.

It attempts to address what the sponsors see as issues with the NFIP, which is administered by the Federal Emergency Management Agency (FEMA), many of which came to light following Hurricane Katrina and Superstorm Sandy. These include low participation rates, inaccurate flood maps, inadequate flood control infrastructure, agency mismanagement, debt service costs and contractor profits.

While similar in many features, it also differs in some respects from the flood reform measures already passed in June by the House Financial Services Committee by a bipartisan vote of 59 to 0.

The Senate’s NFIP Re proposal was introduced with bipartisan support that included the following original cosponsors: Bill Cassidy (R-La.); Cory Booker (D-N.J.); John Kennedy (R-La.); Elizabeth Warren (D-Mass.); Marco Rubio (R-Fla.); Kirsten Gillibrand (D-N.Y.); Jack Reed (D-R.I.); and Chris Van Hollen (D-Md.).

Bipartisan companion legislation is being introduced in the House of Representatives by Reps. Frank Pallone, Jr. (D-N.J.) and Clay Higgins (R-La.) and is co-sponsored by Reps. Bill Pascrell, Jr. (D-N.J.), Albio Sires (D-N.J.), Mikie Sherrill (D-N.J.), Jeff Van Drew (D-N.J.), Bonnie Watson Coleman (D-N.J.), Donald Payne, Jr. (D-N.J.), Josh Gottheimer (D-N.J.), Tom Malinowski (D-N.J.), Donald Norcross (D-N.J.), Chris Smith (R-N.J.), Andy Kim (D-N.J.), Debbie Mucarsel-Powell (D-Fla.), Charlie Crist (D-Fla.), and Stephanie Murphy (D-Fla.).

“We’ve witnessed the NFIP fail our constituents in their greatest hour of need and, after countless reauthorizations that simply kick a broken can down the road, we want real reform,” said Sen. Menendez.

“With the National Flood Insurance Reauthorization and Reform Act of 2019, we can make the program more sustainable, more affordable, hold FEMA and private contractors accountable, and invest in the kind of forward-looking mitigation that reduces risk and prevents costly flooding in the first place.”

Sen. Kennedy noted that five million Americans rely on the NFIP. “For many people, this program is as essential as air and water,” he said “Louisiana has been home to people for centuries. Louisiana energy jobs are helping the U.S. end its reliance on foreign oil. Through common sense reforms, we can create a flood insurance program that continues to protect people’s homes at affordable rates while remaining solvent.”

“With rising sea levels and heavier rainfalls bearing down on our communities, it’s critical that we reform our flood insurance program to reduce financial risk for families and bring people the peace of mind they deserve,” said Sen. Warren.

“The National Flood Insurance Program is vitally important to my home State of Florida as it holds more than one-third of total policies nationwide,” said Sen. Rubio said, who added, “The federal government must take a more proactive approach in addressing the underlying risk affecting flood prone communities, and unfortunately, instability has long plagued the program.”

“I remember touring the devastation of Sandy like it was yesterday. Homes damaged. Businesses destroyed. The mold. The sand. The debris. I spoke with my constituents who saw their entire lives swept away in an instant. I vowed that day never to stop fighting for them,” said Rep. Pascrell, one of the sponsors of the House proposal.

According to the sponsors, key features of the Senate’s NFIP Re) Act of 2019 include:

  • Rate Hikes under Risk Rating 2.0. Protects policyholders from premium hikes by capping annual increases at 9%. Currently, premiums can more than double every four years or less under FEMA’s new methodology called Risk Rating 2.0, which the bill seeks to regulate.
  • Low- and Middle-Income Policyholders. Provides a means-tested voucher for millions of low- and middle-income homeowners and renters if their flood insurance premium causes their housing costs to exceed 30% of their adjusted gross income
  • NFIP Financials. Freezes interest payments on the NFIP debt and reinvests savings towards mitigation efforts.
  • Private Insurer Profits. Caps Write Your Own (WYO) compensation at the rate FEMA pays to service its own policies.
  • Cost of Compliance (ICC) Coverage. Increases the maximum limit for ICC coverage to better reflect the costs of rebuilding and implementing mitigation projects. Also expands ICC coverage eligibility.
  • Business Interruption– Authorizes a study on offering this coverage.
  • Mitigation. Provides increased funding for mitigation to reduce flood risk. Establishes a revolving loan fund for mitigation efforts with a priority given to high-flood risk states.
  • Mapping. Authorizes funding for Light Detection and Ranging (LiDAR) technology for more accurate mapping of flood risk across the country.
  • Write Your Own (WYO) Companies. Creates new oversight measures for insurance companies and vendors, and provides FEMA with greater authority to terminate contractors that have a track record of abuse.
  • Claims and Appeals Process. Reforms the claims process including holding FEMA to deadlines and ends FEMA’s reliance on outside for-profit legal counsel.
  • Training. Provides for increased training and certification of agents and adjusters.

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