Saturday, February 22, 2014
GOP introduces bill to reduce costs to homeowners and businesses of Biggert-Waters flood insurance reforms
Rep. Bill Cassidy, R-Baton Rouge, speaks to constituents on Jan. 13. Cassidy is a co-sponsor of new legislation that will repeal provisions of the Biggert-Waters Act that will cause flood insurance rates to increase dramatically for some homeowners and businesses. (Brett Duke, NOLA.com | The Times-Picayune archives
February 22, 2014
House GOP leaders introduced legislation late Friday to make sweeping changes in the2012 Biggert-Waters flood insurance reform act that will reinstate subsidized rates for homes in more flood-prone areas and allow new owners to keep the subsidized rates following a home's sale.
"This legislation is important for Louisiana, and I am proud to have worked with Michael Grimm of New York and members of the Louisiana and other Congressional delegations to produce this bold legislation that provides immediate relief," said Rep. Bill Cassidy, R-Baton Rouge, who helped write the bill.
The legislation authored by U.S. Rep. Michael Grimm, R-NY, and co-sponsored by members of the Louisiana delegation, also lists Rep. Maxine Waters, D-Calif., one of the authors of the Biggert-Waters Act, and other Democrats as co-sponsors, including Rep. Cedric Richmond, D-New Orleans, but that's only because the Republican language was pasted into an existing bill on which they were already listed as co-sponsors that was an attempted compromise.
Democrats, including Waters, continue to negotiate with Republican leaders over the language contained in the bill, but the Republicans filed their version late Friday as a procedural move to clear the way for a vote on the measure next week.
"I am encouraged by the progress we've made to advance legislation that will provide relief to those facing skyrocketing flood insurance premiums," Waters said in a statement early Saturday. "Over the next several days, I will continue active negotiations with Republican leadership, the bill's authors and members of the U.S. Senate. I look forward to working with them to ensure this legislation is written in a manner that provides the relief so badly needed by our nation's homeowners. If it falls short, I will continue to press for consideration of the bipartisan legislation now supported by an overwhelming majority of 235 House members."
Also listed as a co-author of the legislation are U.S. Reps. Steve Scalise, R-Metairie; Charles Boustany, R-Lake Charles;
If approved by the House and accepted by the Senate, which has already passed legislation that would simply delay the implementation of the Biggert-Waters rate increases for subsidized policies for four years, FEMA would still be allowed to use existing rules to slowly raise rates for those policies to more actuarially sound levels over a much longer period of time, according to Cassidy staffers.
The Biggert-Waters rate increases were aimed at reducing the potential cost of hundreds of thousands of policies that had been granted subsidies, and would have reduced what's been estimated as a $25 billion deficit in the National Flood Insurance Program's budget caused by damages during Hurricane Katrina in 2005 and Hurricane Sandy in 2011.
Cassidy and other Louisiana members of Congress contend the Biggert-Waters changes penalize state residents who must live in flood-prone areas because of their employment, including oil and gas production workers and fishers, and that the law penalized residents whose homes were built and purchased long ago under the old rules and otherwise meet state and local building codes.
Supporters of Biggert-Waters point out that those homes often are the source of multiple flood insurance claims that have dramatically increased the cost of the insurance program, as the number and cost of major disasters along the nation's coastline have increased.
But Cassidy and other Gulf Coast and East Coast congressmen have complained that the dramatic rate increases -- some as much as five times the existing rates -- have also made it both impossible for many homeowners to afford the insurance or to sell their homes, since the high rates have scared away buyers. And that could result in reduced numbers of policies being sold, which also would hurt the ability of the insurance program to pay for itself.
The new legislation, HR 3370, would also provide a refund for people who had purchased homes with subsidized rates since 2012 without realizing the rates would undergo significant increases.
The bill also would raise the trigger for losing the insurance subsidy for damaged homes from 30 percent of their fair market value to 50 percent, which was the threshhold that triggered unsubsidized rates before the passage of the Biggert-Waters Act.
Under Congressional rules, the bill's costs are required to be offset by other revenue. That would be done by assessments of about $25 a year for all National Flood Insurance Program policies for primary residences, and about $250 a year for businesses and non-primary residences, such as second homes or vacation homes. That means the subsidies will continue to be paid for by those paying the actuarially correct rates for their insurance, as well as the subsidized policy holders.
Cassidy staffers said those fees would be used placed into a trust fund to be used to cover increased claims during disasters, and would produce about $1 billion over 5 years and $2.3 billion over 10 years.
Also in the legislation is a provision requiring FEMA to complete a study of the ability of insurance policy holders to afford actuarially sound rates, such as are required by the Biggert-Waters Act, by September 30, 2017, which is the date that the National Flood Insurance Program expires and would need to be reauthorized. The bill also includes about $2 million to complete the study.