U.S. Sens. Kirsten Gillibrand (D-NY), Bill Cassidy, MD
(R-LA), and Shelley Moore Capito (R-WV) introduced legislation last week to reauthorize the National Flood Insurance Program (NFIP), which is currently set to expire on September 30, 2017.
This proposed legislation would reauthorize the NFIP over a 10-year term through 2027. The bill also reforms the NFIP in several ways.
One, it would remove barriers to privatization. Market entrance by private insurers should preserve the availability and affordability of flood insurance coverage for all consumers while continuing the investment in floodplain mapping and management. It would also allow NFIP policyholders to purchase a private flood insurance policy and switch back to NFIP coverage without losing continuous coverage or grandfathering status.
It would gradually phases-in private coverage by initially expanding eligibility, over a two-year period, to certain risk classifications (i.e. business properties, second homes, and severe repetitive loss properties). The Biggert-Waters Act (P.L. 112-141) has set an aggressive rate adjustment trajectory for these risk categories where full actuarial rates will be realized in a compressed timeline.
In addition, it would instruct the Federal Emergency Management Association (FEMA) administrator to engage in NFIP risk-sharing pilot programs where write-your-own companies or other qualified insurers assume a first-loss position of claims at or below $50,000. The NFIP operating in a secondary loss position for all structures encompassed in such pilot programs will be at the determination of the administrator.
“After Superstorm Sandy hit New York, this program failed too many families who had paid their premiums and were relying on their insurance to rebuild. We cannot turn our backs and let this happen again,” Gillibrand said. “This bipartisan bill would help ensure that flood insurance is more affordable and not riddled with the loopholes that left homeowners on their own fighting with insurance companies while trying to recover from the devastation. It would also provide more money to help communities protect against flood risk, like those currently experiencing record flooding along Lake Ontario and the Saint Lawrence River. I am proud to lead this fight with Senator Cassidy, and I will continue to do everything I can to stand with New York homeowners.”
It would also increase coverage limits from $250,000 to approximately $500,000 for residential structures and $500,000 to approximately $1,000,000 for multifamily and businesses structures. This would seek to mitigate financial loss and enhance coverage for the replacement value of structures in competitive property markets. Instead of making a one-time increase, the coverage limits would track the Federal National Mortgage Association (Fannie Mae) confirmation loan limits for single-family dwellings.
“This is a product of listening to those affected, finding from stakeholders those policies that would address affordability and sustainability within the NFIP,” Cassidy said. “The goal of this bipartisan bill is to bring peace of mind for Louisiana families, and for all American families, seeking to buy flood insurance.”
Further, it authorizes FEMA to develop meaningful cost reductions, in excess of 10 percent of the current risk premium rate for a property, for flood mitigation activities undertaken on properties in all zones, including moderate risk zones.
“The National Flood Insurance Program is important for communities that have experienced severe flood damage like those in West Virginia,” Capito said. “This legislation will eliminate uncertainty for residents by reauthorizing the program for another decade, and I am proud to support a bipartisan bill that will help provide West Virginians with affordable protection needed in case of a natural disaster.”
Finally, it would enable FEMA to study the feasibility of selling or licensing the use of anonymized historical claims data to non-governmental entities. Proceeds from sale or license transactions shall be deposited into the National Flood Insurance Fund.