The House bill requires the owners of vacation homes to pay market rates for flood insurance coverage from the NFIP, ends subsidies for repetitive loss properties, and will update flood maps and require homeowners within the 100-year flood plain to have flood insurance.

The Flood Insurance Reform and Modernization Act of 2006 (H.R. 4973) passed by a roll call vote of 416 to 4 following the adoption of 13 amendments. The measure would force owners of second homes and nonresidential properties to pay actuarial rates, which would be phased in over time.

It would temporarily increase the borrowing authority of the Federal Emergency Management Agency, which administers the program, from $20.8 billion to $25 billion in order to cover claims of the 2005 hurricane season. The bill would also set higher penalties for lenders that do not ensure that homeowners purchase the insurance.

A separate NFIP reform bill was approved May 25 by the Senate Banking Committee and is awaiting floor action. A key difference between the Senate and House bills is that while the House measure raises the NFIP borrowing limit, the Senate proposal forgives approximately $20 billion of the NFIP’s debt, but imposes tougher standards for coverage going forward.

One amendment approved as part of the House bill caused insurers to express concern. The provision by Rep. Gene Taylor (D-La.) requires the Government Accountability Office to conduct an investigation of the wind vs. water issue in the wake of Hurricanes Katrina and Rita, and produce a report in six months. The amendment directs that the inspector general of the Department of Homeland Security investigate claims adjusted by insurance companies that contract with the program to determine if they improperly assigned damages to flooding that should have been paid by windstorm coverage provided elsewhere.

House Financial Services Committee Chairman Michael Oxley (R-Ohio), manager of the bill, said Republicans think it is “appropriate” that the Inspector General investigate the controversy.

During floor debate, Oxley said the bill “requires FEMA to administer the program more responsibly.”

July 3, 2006