Flood Insurance Reauthorization Now Law of the Land
President Obama has signed legislation that reauthorizes the National Flood Insurance Program until Sept. 30, 2017.
The signing late Friday marks the first time since 2004 that a new NFIP reauthorization has gone into effect, and ends a political stalemate that began in 2007, when debate opened in the House on legislation that would replace the NFIP reauthorization legislation enacted in 2003.
The program has been extended for short intervals 17 times since its authorization first ran out Sept. 30, 2008, according to data compiled by officials of the House Financial Services Committee.
The program temporarily lost authorization four times, mostly in 2011, resulting in postponement of house sale closings in communities where flood insurance is mandatory for 53 days, according to the FSC and industry officials.
The bill is Title II of H.R. 4348, the Surface Transportation Extension Act of 2012.
Key highlights include allowing the Federal Emergency Management Agency to raise rates a maximum of 20 percent annually, as compared to 10 percent annually under the current program.
It also mandates that owners of second homes, properties with repetitive flood claims and commercial properties will go up 20% over the next five years, raising them to actuarially-adjusted fees. That will be effective July 1.
The bill reiterates FEMA’s authority to buy private reinsurance to back the program, which is aimed at reducing FEMA’s reliance on Treasury loans to fund the program.
The reforms are projected to generate an additional $2.7 billion in new revenues over 10 years, according to the Congressional Budget Office.
Despite the sigh of relief that long-term certainty has been achieved, insurance industry officials are privately voicing concern about two areas of the bill.
One is removal of a provision that mandated that homeowners who live behind levees and other flood control structures buy flood insurance.
The other is the provision raising rates to market level within four years on second homes and vacation properties.
The concern is that allowing homeowners and businesses situated in areas behind levees to escape paying into the program will reduce revenues, and that those being forced to pay market rates for second homes and vacation properties will decide to buy private insurance.
That will rob the program of needed revenues, and throw off the calculations used by the CBO to project higher revenues through the reforms included in the program, the officials said.
They asked not to be identified because the charged political atmosphere in Washington makes industry officials hesitant to voice concerns for the record.
This article was originally posted at PropertyCasualty360, a sister site of Credit Union Times.