House Passes Flood Insurance Extension
The House passed a bill that would extend the National Flood Insurance Program until July 31.
The bill, approved by voice vote also includes a provision demanded by the Senate that will phase out subsidies on second homes over four years, effective July 1.
The bill is H.R. 5740.
Based on commitments by the Senate leadership, the House action raises the “likelihood” that legislation reauthorizing the program until Sept. 30, 2016 could be passed by Congress before it leaves for its summer recess Aug. 3, according to an industry lobbyist.
That would be based on the fact that Sen. Harry Reid, D-Nev., Senate Majority Leader, has indicated that he hopes the full Senate will act on S. 1940, its version of long-term reauthorization of the program within two weeks of returning from its Memorial Day recess June 4.
That would set the stage for reconciling the final version of S. 1940 with H.R. 1309, House version of the legislation passed by the House last July.
After the vote, Rep. Judy Biggert, R-Ill., chief sponsor of the House version of the bill, said, “The good news here is that the Senate has expressed a commitment to take up a long-term flood reform bill in June. I welcome that development and look forward to working with the Senate to ensure that we send a final long-term reform bill to the President this summer.”
If the House had not acted by Thursday, the current reauthorization of the NFIP would have run out May 31.
Suspension of the program would have meant that flood policyholders could not make policy changes, nor could new homeowners apply for flood insurance, according to officials at State Farm and the National Association of Mutual Insurance Companies.
The first market reaction to the House vote will be an increase in a 25 percent increase in flood insurance rates for any property that is not a primary residence.
This provision was demanded by Sen. Tom Coburn, R-Okla., as his price for allowing the latest extension to be approved. He also demanded as his price for allowing H.R. 5740 to be pushed through the Senate under unanimous consent rules that the current extension for the current program be the last.
“We’re pleased the House acted to avoid a lapse while also passing these meaningful reforms,” said Matt Gannon, assistant vice president for federal affairs for the National Association of Mutual Insurance Companies
“These subsidy cuts are just part of the reforms on which there is broad consensus, but more work still needs to be done,” he said.
“Congress can be proud of this responsible debt-reduction measure, but they can’t stop now,” he said.
“This week’s Atlantic storms remind the country of the need for a stronger NFIP. We urge the Senate to keep up the momentum by voting on their bill as soon as they convene next week,” Gannon said.
According to Ray Lehmann, director of public affairs at the R Street Institute, said that the definition as contained in the bill passed last Thursday in the Senate includes all non-primary residences, not just vacation homes.
The first set of 25% increases would come on July 1, and then they would -- presuming the five-year reauthorization is passed -- be scheduled annually until the property's rates reach full actuarial rates, Lehmann said.
The Congressional Budget Office projects that end subsidies on non-primary residences will yield revenues of $2.4 billion over 10 years. The NFIP is currently approximately $18 billion in debt.
Lehmann said that the Government Accountability Office estimated in 2004 that 30% of NFIP policyholders with subsidized premiums are second homes or vacation homes. Given that there are 5.6 million NFIP policies, about 20% of them receive subsidized rates, it would be about 335,000 policies that would be affected by the change, Lehmann said.
The Federal Emergency Management Agency, which runs the NFIP, said it does not comment on pending legislation.
Arthur D. Postal is Washington bureau chief for National Underwriter, a sister publication to Credit Union Times.