Flood Insurance Increase Delayed

By Steve Viuker on February 7, 2014

U.S. homeowners with properties in flood zones gained major traction in their fight to impose a four-year delay on federal flood insurance premium hikes.

The Senate passed its own version of a bill that aims to stall provisions of the Biggert-Waters Flood Insurance Reform Act of 2012. The Homeowner Flood Insurance Affordability Act  passed the Senate 67-32 in a vote that ended months of fighting among legislators over the bill that requires the Federal Emergency Management Agency to complete an affordability study and propose solutions to address flood insurance cost issues before premiums can be raised. Biggert Waters, which was passed to ensure the National Flood Insurance Program moves closer to solvency and sound underwriting, tried to incorporate a more risk-based approach when setting premiums for insurance offered through NFIP. 

Richard McGrath of the McGrath Insurance Group, told totalmortgage.com  “The bill delays the bought/sold provision of the Biggert-Waters Act, and will assist with the high premiums that have developed as a result of the act. Hopefully, this will make flood insurance more affordable for the buying public. I am happy to see that FEMA recognizes the need for a study for their policyholders with affordability in mind.” 

House Republicans beat back a Democratic procedural effort to force a vote on Senate-passed legislation to delay flood insurance premium increase resulting from a 2012 law for four years. The vote was 225-193 to block a procedural motion that could have led to a vote on the Senate bill. All Democrats voted for the motion. Sen. David Vitter, R-La., said he believes the House will pass a bill to deal with large premium increase, though it’s likely to be different than the bill that passed the Senate last week. The Senate bill delaying most of the hikes for four years to give FEMA and Congress time to work out a system to keep the program affordable for middle class homeowners. Once the House acts, Vitter said, it will set up House-Senate negotiations — a process Vitter said he expects will result in a “strong bill.” 

“When it comes to flood insurance, there is no competition in pricing,” said McGrath. “The federal government sets the rates. Policyholders are seeing a 25 to 100 percent rate increase on their flood premiums, and they weren’t prepared for an increase of that size. Consumers are realizing that the benefits of this coverage are important to flood prone areas. However, that coverage can cost as much as an annual mortgage. The government saw that a transition was needed to prepare customers for the difference in coverage and price.” 

According to the Bipartisan Policy Center, many of the provisions of Biggert-Waters are effectively being repealed by delaying them until after the NFIP will have to be reauthorized in October 2017. To be precise, the Senate bill would delay the higher premiums for two years from the date of enactment for FEMA to finish the still unfinished affordability study originally mandated to be completed nine months after the enactment of Biggert-Waters, another 18 months for FEMA to draft an affordability framework that might include targeted assistance to individual policyholders, another six months for Congress to pass the affordability framework under an accelerated process, and then further delay them until implementation of the affordability framework is completed. 

The Senate’s stamp of approval on the bill “is an important step in the fight to prevent tens of thousands of New Yorkers from facing crippling flood insurance premium increases and loss of property value,” said U.S. Sen. Charles Schumer (D-NY), one of the bill’s co-sponsors. 

“New Yorkers are still recovering from the destructive force of Superstorm Sandy and back-to-back years of extreme weather and flooding, and this bill prevents for many the injustice that these homeowners were going to face – increased flood insurance premiums that can break the bank,” said Schumer.“The bottom line is that FEMA must do the required affordability study first. It makes no sense to raise the flood insurance rates before we consider how homeowners will be able to afford to pay them, so I am urging my colleagues in the House to quickly follow suit and pass this bill.” 

The Government Accountability Office said, “The Biggert-Waters Act eliminates some subsidized rates, but some have proposed delaying these rate increases. Doing so could address affordability concerns, but would also delay addressing NFIP’s burden on taxpayers.”