Flood Insurance Reform Bill Headed to President:

Not Perfect, but Much Better

City officials with concerns about the National Flood Insurance Program (NFIP) following the implementation of the Biggert-Waters Act of 2012, frequently referred to as “BW-12,” will be pleased to know that a bill providing some relief has passed Congress and is headed to the President.

The Homeowner Flood Insurance Affordability Act (H.R. 3370) is a federal bill that would modify the BW-12 implementation by, among other things: (1) limiting the Federal Emergency Management Agency’s ability to raise premiums; (2) repealing the “pop up” to current rates for a home that is covered under the NFIP and sold to a new owner; and (3) restoring the “grandfathering” of certain properties.        

The TML membership adopted a resolution at the 2013 annual conference supporting efforts to amend or revise BW-12 to reduce the law’s severe short term economic/financial impact.  TML worked with other state leagues and the National League of Cities, which spearheaded reform efforts, on the issue.  

As a result, the Senate passed the House version of H.R. 3370 “as-is” on March 17.  The Senate Sponsor’s (Robert Menedez, D – NJ) office provided the following summary of the bill’s main provisions: 

    • Creates a firewall on annual rate increases – Prevents the Federal Emergency Management Agency (FEMA) from raising the average rates for a class of properties above 15 percent and from raising rates on individual policies above 18 percent per year for virtually all properties.
    • Repeals the property sales trigger – Repeals the provision in BW-12 that required homebuyers to pay the full-risk rate for pre-FIRM (flood insurance rate map) properties at the time of purchase. The provision caused property values to steeply decline and made many homes unsellable, hurting the real estate market. Under the bill, homebuyers will receive the same treatment as the home seller.
    • Repeals the new policy sales trigger – Repeals the provision in BW-12 that required pre-FIRM property owners to pay the full-risk rate if they voluntarily purchase a new policy. This provision disincentivizes property owners from making responsible decisions and could hurt program participation. The bill allows pre-FIRM property owners to voluntarily purchase a policy under pre-FIRM conditions.
    • Reinstates grandfathering – Repeals the provision in BW-12 that would have terminated grandfathering. If grandfathering were terminated, property owners mapped into higher risk would have to either elevate their structure or have higher rates phased in over five years. The bill allows grandfathering to continue and sets hard caps on how much premiums can increase annually.
    • Refunds homeowners who overpaid – Requires FEMA to refund policyholders for overpaid premiums.
    • Affordability goal – Requires FEMA to minimize the number of policies with annual premiums that exceed one percent of the total coverage provided by the policy.

The bill has a number of additional features.  Of particular interest are the following 

    • Mapping accuracy – Requires FEMA to certify its mapping process is technologically advanced and to notify and justify to communities that the mapping model it plans to use to create the community’s new flood map are appropriate. The bill also requires FEMA to send communities being remapped the data being used in the mapping process.
    • Notification – Requires FEMA, at least six months prior to implementation of rate increases, to make publicly available the rate tables and underwriting guidelines that provide the basis for the change, providing consumers with greater transparency. 

Thanks to the National League of Cities, Texas cities, and other state leagues for their efforts.  

TML member cities may use the material herein for any purpose. No other person or entity may reproduce, duplicate, or distribute any part of this document without the written authorization of the Texas Municipal League. 

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