Latest news about Flood

The economic ramifications surrounding unaffordable flood insurance has the potential to devastate home values, small businesses, and entire communities across the country. Since the U.S. House of Representatives took initial action on June 5, 2013 to delay certain flood insurance rate hikes, FEMA has released its Specific Rate Guidelines; confirming fears of sudden and steep rate increases for many Americans.

A solution that truly balances fiscal solvency with consumer affordability

CBO’s Official Score is $0

“CBO estimates that the changes proposed by
H.R. 3370 would have no significant effect on net income
to the NFIP over the 2015-2024 period.”


Section by Section

Section 1:          Provides short bill title, the Homeowner Flood Insurance Affordability Act of 2014, along with a table of contents.




Section 2:         Provides for the definition of the FEMA Administrator and the National Flood Insurance Act of 1968 (42 U.S.C. 4001 et seq.).

   
     
Section 3:         Repeal of Certain Rate Increases – repeals the portions of the Biggert-Waters Flood Insurance Reform Act of 2012 (42 U.S.C. 4014(g)                            (1)(2)) that removes Pre-Flood Insurance Rate Map (PR- FIRM) subsidies on properties that were (1) not insured by the flood insurance                            program as of July 6, 2012 or (2) purchased after July 6, 2012. The section also allows a policyholder to retain Pre- FIRM subsidized                                  status if a lapse in flood insurance coverage was the result of the property no longer being required to retain flood insurance coverage.                              The section also ensures that the repeals described above are retroactive to the enactment of the Biggert-Waters Flood Insurance                                      Reform Act of 2012 (Public Law 112-141). The section requires FEMA to promulgate rules to initiate refunds to the policyholders for any                            rates collected in excess in relation to the repeals of 42 U.S.C. 4014(g)(1) &(2).

Section 4:           Restoration of Grandfathered Rates – repeals Section 1308 of the National Flood Insurance Act of 1968 (42 U.S.C. 4015). This                                     section that all post-FIRM properties built to code at the time of construction will have protection from rate increases triggered by                                       changes to FEMA Flood Insurance Rate Maps (FIRMS).

Section 5:           Requirements Regarding Annual Rate Increases – prevents FEMA from increasing premiums within a single property class beyond                               15 percent a year. Prior to the Biggert-Waters Flood Insurance Reform Act of 2012 (Public Law 112-141), FEMA was unable to increase                             rates beyond 10 percent a year. Currently (Post Biggert-Waters), FEMA is unable to increase rates beyond 20 percent a year. The rate                               increase limitations are a composite of average rate increases for properties within a risk classification during any 12-month period. The                             section codifies existing FEMA practice to minimize the quantity of policyholders that may exceed the average annual rate increase limit                             of 15% by establishing an 18% per property annual rate increase limit. Historically, FEMA has not used its full authority to increase                                     rates up to the prescribed limitation. The section also requires a 5% minimum annual increase on pre-FIRM primary residence policies                               that are not at full risk.

 

Section 6:           Clarification of Rates for Properties Newly Mapped into Special Flood Hazard Areas - Continues FEMA’s practice of allowing                                      homes newly mapped into an area with special flood hazards to be given a preferred risk rate policy. This section clarifies the rate                                      increases will not exceed the average annual rate increase limit of 15% as established by Section 5 of this Act.

Section 7:            Premiums and Reports - In setting premium risk rates, in addition to striving to achieve actuarial soundness, FEMA is instructed to try                              and minimize the number of policies with annual premiums that exceed one percent of the total coverage provided by the policy.

Section 8:            Annual Premium Surcharge – provides for the assessment of annual surcharges in the amount of $25 for primary residence                                            properties and $250 for non-residential properties and non-primary residential properties. All revenue derived from the annual                                            surcharges would be deposited in the NFIP Reserve Fund, which was established to ensure funds are available for meeting the                                          expected future obligations of the NFIP.

Section 9:             Draft Affordability Framework - directs FEMA to prepare a draft affordability framework that proposes to address the issues of                                         affordability of flood insurance sold under the NFIP. Suggested affordability framework criteria includes: (1) accurate communication to                               consumers of the flood risk associated with their properties, (2) targeted assistance to flood insurance policy holders based on their                                   financial ability to continue to participate in the NFIP, (3) individual or community actins to mitigate the risk of flood or lower the cost of                               flood insurance, (4) the impact of increases in risk premium rates on participation in the NFIP, and (5) the impact of increases in risk                                   premium rates on participation in the NFIP. The deadline for submission of the affordability framework is 18 months after FEMA                                           submits the affordability study (required under Section 100236 of the Biggert-Waters Flood Insurance Reform Act of 2012) to                                             Congress.

Section 10:            Risk Transfer – authorizes the FEMA administrator to fiscally prepare the National Flood Insurance Program for extreme                                                    catastrophic events through the transfer of risk to the private market or otherwise.

Section 11:            

Monthly Installment Payment for Premiums – authorizes FEMA to provide for both monthly and annual premium payment                                              installment options.

Section 12:           Optional High-Deductible Policies for Residential Properties – increases the maximum deductible for single family residences and                               any 2- to 4- family buildings to $10,000. Requires disclosure of the level of out-of-pocket expense the insured is responsible for in the                                 event of an insured loss.  



Section 13:            Exclusion of Detached Structures from Mandatory Purchase Requirement – authorizes the exclusion of detached structures that                                are not used for residential purposes from the mandatory purchase requirement. Detached structures are typically identified on the                                    appraisal of a property. If the lender wants to require insurance on the detached structures this would give flexibility to do so – where                                  those structures actually contribute value to the collateral from a safety and soundness perspective. The section would also allow                                      lenders to waive coverage when the detached structures are of nominal value.



Section 14:            

Accounting for Flood Mitigation Activities in Estimates of Premium Rates – authorizes FEMA to consider and incorporate                                          various flood mitigation activities when estimating and calculating risk premiums rates.

Section 15:            Home Improvement Fairness – returns the “substantial improvement threshold” (i.e. renovations and remodeling) to the historic                                      50% of a structure’s fair market value level and ensures that necessary renovations can continue without penalizing homeowners                                      with excessive flood insurance rate hikes and costly mitigation. Under Biggert-Waters, flood insurance premium increases are                                            triggered when the renovation investments meet 30% of the home’s value. This section raises that level to 50% of the home’s value                                    (prior to Biggert-Waters levels).



Section 16:Affordability Study and Report – expands the scope of the affordability study mandated under Section 100236 of the Biggert-Waters                               Flood Insurance Reform Act of 2012 (Public Law 112-141) to also include a study of: (1) options for maintaining affordability if annual                                 premiums for flood insurance coverage were to increase to an amount greater than 2 percent of the liability coverage amount under                                   the policy, including options for enhanced mitigation assistance and means-tested assistance; (2) the effects that the establishment of                               catastrophe savings accounts would have regarding long-term affordability of flood insurance coverage; and (3) options for modifying                                 the surcharge under Section 6 of this Act, including based on homeowner income, property value or risk of loss. This section also                                       requires the completion of the study no later than 2 years after the enactment of this Act. In addition, this section provides FEMA the                                   necessary funding to complete the affordability study.

 

 

Section 26:            Flood Mitigation Methods for Buildings – requires FEMA, not later than 1 year upon enactment of this Act, to issues guidelines for                                property owners that provide alternative methods of mitigation, other than building elevation, to reduce flood risk to residential                                            buildings that cannot be elevated due to their structural characteristics.

Section 27:            Mapping of Non-Structural Flood Mitigation Features – requires FEMA to account for non- structural flood mitigation features,                                      such as forests, marshlands and other natural features, in Flood Insurance Rate Maps.




Section 28:             Clear Communications – requires the Administrator of FEMA to clearly communicate full flood risk determinations to individual                                         property owners regardless of whether their premium rates are full actuarial rates.




Section 29:             Protection of Small Businesses, Non-Profits, Houses of Worship, and Residences – requires FEMA to assess the impact rate                                   increases and/or surcharges will have on: (1) small businesses with less than 100 employees, (2) non-profit entities, (3) houses of                                     worship, and (4) residences with a value equal to or less than 25 percent of the median home value of properties in the State in                                         which the property is located. The section also requires FEMA to develop recommendations on ways to improve affordability no later                                 than 3 months after it determines increased rates and/or surcharges are having a detrimental effect on the policyholder categories                                     listed above.

Section 30:              Mapping – requires FEMA to notify communities of remapping as well as models used in the mapping process. Members of                                              Congress are also to be notified of proposed flood map changes within the relevant state or congressional district.




Section 31:               Disclosure - addresses the ability of the NFIP to share its data with the public in accordance with applicable all laws designed to protect consumers’                                       personally identifiable financial information. Providing greater transparency with claims data will help enable private insurers to provide consumers                                           with more flood insurance options.