Rep. Judy Biggert Gets National Flood Insurance Reforms Through House of Rep.
By Ellen Cannon
Yesterday the House voted 406-22 to overhaul the National Flood Insurance Program (NFIP). The bill, H.R.1309 The Flood Insurance Reform Act, a five year reauthorization bill, was written by Rep. Judy Biggert (R-IL) who chairs the Subcommittee on Insurance, Housing and Community Opportunity of the House Financial Services Committee. Cosponsored by Maxine Waters (D-CA), Shelly Moore Capito (R-WV), Scott Garter (R-NJ), (R-Dold IL), Steve Stivers (R-OH), and 14 others, the bill phases in risk based premiums; reduces subsidies to certain properties, including high risk buildings subject to repeat claims; and confirms FEMA’s authority to utilize private insurance in lieu of taxpayer exposure to mitigate risk; and directs FEMA to report on proposals from the private market for assuming risk within the program.
According to the Illinois Department of Natural Resources, more than 250,000 Illinois buildings and 15% of Illinois land lies in floodplains, which would be negatively impacted if the program was allowed to expire on September 30, 2011.
Since 2006, the Government Accountability Office (GAO) has identified the flood insurance program as “high risk” because of inadequate and insufficient funds. Hurricanes and natural disasters starting in 2005, especially the impact of Katrina, nearly terminated the program. FEMA presently owes over $17.8 billion to the Federal Treasury. Revamping of the program was attempted in 2004 but was not successful. The failure to revamp the program in part stemmed from the continued building of properties in high risk areas. About 40% of claims are being paid to property owners which are repeatedly flooded. Consequently supportive lawmakers and stakeholders favored new legislation only if rebuilding required property owners to agree to no taxpayer reimbursement for flood losses.(www.washingtonpost.com,July12, 2011)
The National Flood Insurance Program was created by Congress in 1968. It is administered by FEMA, which is an agency in the Department of Homeland Security. The NFIP was designed as a voluntary program. As a result of Hurricane Agnes, in 1973, the purchase of flood insurance became mandatory. Anyone buying property with a Veterans Administration or Federal Housing Administration loan had to purchase the insurance. The citizen pressure to buy the insurance caused communities to pass ordinances and join the NFIP. As a result of the 1993 Midwest floods, the NFIP was once again reformed. The new legislation in the 1993 increased compliance by telling communities if they did not join the program, they would be eligible for disaster assistance only one time. Further requests would not be positively responded to. In addition the 1993 legislation established the Flood Mitigation Assistance fund for flood planning, flood mitigation grants, and additional policies that potentially could assist with more difficult compliance concerns. More than 20,000 communities are in the NFIP mitigation program. (George Haddow, et.al, Emergency Management )
Today, flood insurance can be purchased by private insurers. The rates are set by the federal government and do not vary from agent to agent. Most home insurance policies do no cover flood damage. Most flood policies are marketed, sold, and written on FEMA’s behalf for a fee by more than 85 private insurance companies. The law requires any lender that is federally regulated or insured to require property owners to purchase flood insurance on any property located in a high risk area as a condition of lending. Since 1969 the NFIP had paid more than $30 billion in claims. (AP, July 12, 2011 and www.winzerinsurance.com)
According to Rep. Biggert, “As the first significant reform to the program in nearly a decade, this bill will phase-out taxpayer subsidized rates and restore the integrity of the flood mapping system. It also eliminates barriers to the development of a private flood insurance market, and helps take taxpayers out of the risk business.” (biggert.house.gov./July 12, 2011)
Rep. Supporters of the legislation claim the legislation, if enacted “would increase the flood insurance program’s income by about $4.2 billion over 10 years.”(AP, July 12, 2011). The bill goes to the Senate next and does have the support of President Obama.