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Congressional accord reached on flood insurance rate delay

Flood insuranceA bipartisan group of legislators from the U.S. House and Senate have reached an agreement to delay flood insurance rate increases for at least four years for millions of homeowners.

The agreement, reached between U.S. Rep. Maxine Waters, D-Calif, author of the Biggert-Waters Flood Insurance Reform Act, and other congressional leaders, would delay the rate hikes for four years and require FEMA to complete an affordability study before increasing any flood insurance premiums in the future. A companion bill is expected to be filed by U.S. Sen. Bob Menendez, D-N.J. 

The tentative deal, which still must be voted on in both the House and Senate, was hailed by Gov. Rick Scott and members of Florida's congressional delegation, which urged a delay in the rate increases.

"This is great news for many Floridians who've been told their flood insurance rates were going way up," said Sen. Bill Nelson, a Florida Democrat, in a press release. Nelson was among several Florida lawmakers who proposed similar legislation to dely rate increases for at least a year. "If people can't afford the coverage, what good is it going to do?"

Scott urged President Barack Obama to step in and support the deal "or take any other action within the executive branch to undo these insurance rate hikes that hurt Florida families.'' 

Congress passed the Biggert-Waters Flood Insurance Reform Act in 2012 to make the nation's flood insurance program more financially sound. The program eliminated and phased out subsidies for homeowners in flood-prone areas. But the rate shock was too much to bear for most homeowners, particularly in Florida where consumers hold one-third of all the policies in the national program.

Realtors complained that the rate hikes had a chilling effect on home sales, and Florida regulators said they would consider encouraging private insurers to sell flood insurance as an alternative to NFIP. 

But the conservative R Street Institute, a free-market research group, condemned the proposed rate hike delay on Monday, calling it a give away.

"Delaying the scheduled phase-out of flood insurance premium subsidies amounts to a gift to mostly wealthy homeowners who get to enjoy cheap insurance on their beach homes thanks to taxpayer support," said R.J. Lehmann, a fellow at R Street.

"To the extent that FEMA remapping may result in genuine affordability problems for some homeowners, Congress should look to target those individuals specifically with limited, means-tested support,'' he said. "However, an across-the-board delay in new maps taking effect will only further imperil the program's solvency, while also robbing those policyholders whose remapped properties show a reduced risk of flooding the opportunity to enjoy the lower rates they deserve." 

Here's the report from the Insurance Journal:

Bipartisan Deal Reached to Delay Flood Insurance Premium Hikes: Waters 

October 28, 2013

Key House and Senate members have reached a bipartisan deal to delay changes to the federal flood insurance program that are raising premiums for many homeowners. The bill would require regulators to address affordability of the coverage before implementing rate hikes.

Rep. Maxine Waters, D-Calif., ranking member of the House Financial Services Committee, announced the bipartisan legislative fix for the National Flood Insurance Program (NFIP) that she said will assure that “changes are implemented affordably.”

Senators Mary L. Landrieu, D-La., Johnny Isakson, R-Ga., Robert Menendez, D-N.J., Jeff Merkley, D-Ore., Thad Cochran, R-Miss., Heidi Heitkamp, D-N.D., David Vitter, R-La., and John Hoeven, R-N.D., are among those sponsoring the legislation in the Senate.

Senate and House leaders, who are involved now in budget talks,  have not indicated if or when there might be a vote on any proposals to delay Biggert-Waters.

Waters was a chief architect of the bipartisan Biggert-Waters Flood Insurance Reform Act that ordered an end to many premium subsidies for property owners and a remapping of communities along with other changes that are resulting in many homeowners facing big premium hikes and more property owners being told they must buy flood coverage. In some areas, the premiums hikes are beginning to affect home sales.

The Biggert-Waters law was intended to help reduce the debt of the NFIP, a debt now estimated at more than $25 billion, by bringing rates charged more in line with the risk and losses in flood-prone areas.

The new legislation calls for a four-year delay in most rate increases and requires FEMA, which administers the flood program, to complete an affordability study and propose regulations that address affordability issues.

The bipartisan deal comes after several weeks of negotiations with Democrats and Republicans in the House and Senate. Waters said that on Oct. 9, in the midst of the government shutdown, she convened a bipartisan meeting of nearly 20 House members, as well as Senate staff, to build consensus around an agreement to delay and fix the program.

“Over the past several months, I have felt the harm and heartache that many Americans have already experienced as a result of changes to the National Flood Insurance Program. From the start, I have made clear that I would lead the effort to fix the unintended consequences of the Biggert-Waters Flood Insurance Reform Act,” said Waters in a statement released by her office announcing the deal.

She said the legislation will be released this week in the House and Senate. It will impose a delay likely to total four years for the most vulnerable properties, by delaying implementation of rate increases until two years after FEMA completes an affordability study, which was mandated in Biggert-Waters but not undertaken.

In addition, the legislation requires FEMA to propose regulations that address the affordability issues within 18 months after the completion of the study and establishes a six month moratorium thereafter to provide for Congressional review.

The proposed delay applies to: primary, 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 has estimated it will take two years to complete the affordability study before regulations can be issued and reviewed by Congress, meaning rate increases would be delayed for approximately four years in total, according to Waters.

In addition, Waters said the legislation:

·         Allows FEMA to utilize national flood insurance funds to reimburse policyholders who successfully appeal a map determination.

·         Eliminates the 50 percent cap on state and local contributions to levee construction and reconstruction

·         Protects the so-called “basement exception,” which allows the lowest proofed opening in a home to be used for determining flood insurance rates.

·         Establishes a Flood Insurance Rate Map Advocate within FEMA to answer current and prospective policyholder questions about the flood mapping process.

·         Requires FEMA to certify that the agency has fully adopted a modernized risk-based approach to analyzing flood risk.

Lawmakers from both parties have been clamoring for a delay in the Biggert-Waters reforms.

Business, taxpayer and insurance interests immediately criticized delaying Biggert-Waters as “unfortunate” and “preposterous.”

FEMA Director Craig Fugate, under pressure from lawmakers to delay the premium increases, told Congress last month that legislation is necessary because he does not believe he has the authority under the Biggert-Water Act to stop the changes administratively. He also said there was not enough time or money to complete an affordability study before the changes went into effect.