Senate Gets Bill to Delay Flood Insurance Hikes

BY ARTHUR D. POSTAL

October 28, 2013 

Senate legislation that would effectively delay for perhaps four years all flood insurance rate increases mandated by a 2012 law reauthorizing the National Flood Insurance Program, except for second homes and businesses, was unveiled late Friday night.

It has the support of 18 senators.

Immediately afterwards, Rep. Maxine Waters, D-Calif., a named sponsor of the 2012 law, announced that she would introduce companion legislation in the House. Her likely co-sponsor is Rep. Michael Grimm, R-N.Y.

Specifically, the proposed legislation would apply to primary homes, non-repetitive loss residences that are currently grandfathered; all properties sold after July 6, 2012; and all properties that purchased a new policy after July 6, 2012. 

FEMA officials as well as government and real estate officials in Florida currently estimate that the despite the uproar over the rate hikes imposed by the Biggert-Waters Act, only 20% of flood policies nationwide will see rates go up.

That’s because it mostly affects homes built before communities entered the flood program and drew up floodplain maps in the early 1970s. They have received artificially low rates for decades, officials have said. However, congressional officials from Hawaii to Vermont arefeeling the heat from the rate hikes.

Prompt enactment of the legislation is no slam dunk. Some bills reflecting the new rates started to go out at the beginning of the month.

And, unless sponsors of the bills seeking the delay can come up with funds offsetting the federal budget implications of the legislation, they would have to have a strong majority in order to get a waiver of those budgetary rules. The amount of the required funds will have to be set by the Congressional Budget Office.

Moreover, as a result of Sandy and Katrina, the NFIP owes the Treasury approximately $24 billion.

At the same time, key members of the House Financial Services Committee, as well as other fiscal hawks in both the House and Senate, could hold up passage.

And the insurance industry is likely to object.

For example, Jimi Grande, senior vice president, federal and political affairs, for the National Association of Mutual Insurance Companies, said delaying the reforms of the law, “means returning the NFIP to the days of needing taxpayer bailouts to meet its obligations.”

Grande noted that 406 House members voted for Biggert-Waters “and for the fair and responsible steps it takes towards having individuals pay flood rates that match the actual risk faced by those properties.”

He said that voting to roll back these reforms “is bad policy that will serve to further shift the cost burden onto taxpayers as well as mask the true cost and risk faced by these properties.

“In those cases where homeowners truly face a hardship from the new rates, it makes far more sense to provide a means tested transparent subsidy to make coverage more affordable while still strengthening the program financially," Grande said.

However, pressure is building for some relief. A federal lawsuit seeking an injunction against the rate hikes has been filed in Mississippi by the state’s insurance commissioner. Louisiana is filing a friend of the court in the case, and Florida, and, likely Alabama, are drafting similar briefs.

A hearing on the issues involved in the lawsuit is likely before Thanksgiving, Mississippi Insurance Commissioner Mike Chaney said.

The bill that has been drafted would delay most of the rate hikes until FEMA completes the affordability study mandated by the law, proposes alternatives to the rate hikes, and gives Congress adequate time to review their findings.

The Senate bill would also give FEMA more time to complete the study, provide reimbursement to qualifying homeowners for successful map appeals, give communities fair credit for locally funded flood protection systems, and create an ombudsman within FEMA to answer policyholder questions.

Sen. Mary Landrieu (D-La.) is spearheading the effort to forestall most of the rate increases. She announced the coalition’s plans in a statement sent Friday night said those “adversely affected” by the rate hikes include senior citizens on fixed incomes who have lived in the same homes for decades, homeowners who purchased or built their homes before Flood Insurance Rate Maps (FIRMs) existed, and others “who played by the rules, elevated their homes when maps were released decades ago, only to find that they need to elevate yet again when FEMA redraws their maps.”

Landrieu added, “For some Americans, these premium rate hikes will force them out of their homes and could even erode entire neighborhoods or communities.”