The House has passed H.R. 1309 today which would reauthorize the 41-year old National Flood Insurance Program for an additional 5 years. The NFIP allows property owners within floodways in participating communities to purchase flood insurance from the government at heavily subsidized rates in order to defray the cost to the federal government for repairing damage to buildings and their contents caused by floods. As of April 2010, 5.5 million property owners participate in the NFIP and property owners in more than 21,000 communities are eligible to buy flood insurance. This legislation is coming at a crucial time with the flooding along the Mississippi and Missouri Rivers as well as a report to be released later this month indicating that the size of the nation’s floodplains will grow by 40 to 45% over the next 90 years.
H.R. 1309 is the most significant overhaul of the NFIP since 2004, a year before Hurricane Katrina and regional floods inundated the program with claims creating approximately $18 billion in debt. Relevant portions of the H.R. 1309 include:
- Granting FEMA the authority to temporarily suspend the requirement to purchase flood insurance for 12 months after a federally declared disaster
- Suspending the mandatory purchase requirement for special flood hazard areas that have flood protection systems which are under improvements
- Establishing a 5-year phase-in of new flood insurance rates for properties that were previously protected by an accredited levee
- Phasing out subsidized rates with annual inflationary increases and allowing premium rates to increase by up to 20 percent per year
- Establishing a Technical Mapping Advisory Council to create new mapping standards for 100-year flood insurance rate maps (“FIRMs”), mandating implementation by FEMA of FIRM reformed recommended by the Council, and placing a moratorium on new FIRMs until such reforms are in place
- Requiring FEMA to take into account de-accredited levees
- Encouraging privatization of the NFIP by strengthening “reinsurance” provisions within the NFIP – i.e., insurance for insurers – to help improve the capacity, performance, and financial security of flood insurers
The Senate Banking, Housing, & Urban Affiars Committee hopes to approve a flood insurance reform package by the end of September and has recently held a two-part hearing (Part I and Part II) on proposed fixes.
The reauthorization of the NFIP will be crucial to communities that have 100-year, 250-year, and 500-year flood zones and will continue to play a key role in decisions by corporations to locate their facilities. Of particular importance to city and county governments are the re-mapping portions of H.R. 1309. FEMA has recently placed a moratorium on several of its mapping projects involving levees. The “without levee” analysis is being modified to take into consideration levees which do not meet 44 CFR 65.10 100-year standard but still provide some level of protection. FEMA’s is working to develop a “suite” of modelling approaches to address this analysis but has left many communities with the threat of a significant re-mapping clouding development.
Property owners should be concerned not only with the indexing of flood rate insurance premiums but also the the reinsurance provisions, which aim to reduce the flood insurance through private markets as the federal government seeks to limit its exposure to NFIP’s long-term debt. Reauthorization will also be increasing important as communities along the Missouri and Mississippi Rivers continue to deal with widespread flooding and as FEMA continues to give conflicting messages regarding the requirement to purchase flood insurance.
We expect reauthorization of the NFIP to be hot topic this fall and we will continue to bring you updates as this crucial piece of legislation moves forward.