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Details of the Newly-Passed Flood Insurance Bill

Key highlights of the legislation that reforms and extends for five years the National Flood Insurance Program (NFIP) include allowing the Federal Emergency Management Agency (FEMA) to raise rates a maximum of 20 percent annually, as compared to 10 percent annually under the current program
July 10, 2012

Key highlights of the legislation that reforms and extends for five years the National Flood Insurance Program (NFIP) include allowing the Federal Emergency Management Agency (FEMA) to raise rates a maximum of 20 percent annually, as compared to 10 percent annually under the current program.

It also mandates that rates for second homes, properties with repetitive flood claims and commercial properties will go up 20 percent over the next five years. That will be effective July 1. The bill reiterates FEMA’s authority to buy private reinsurance to back the program, which is aimed at reducing FEMA’s reliance on Treasury loans to fund the program.

Additional highlights:

  • A phase-in of risk-based rates for commercial properties, severe repetitive loss properties, and properties with flood-related damage exceeding their fair market value, and prohibits subsidies for new or lapsed insurance policies. This is on top of the new rates for second homes and vacation homes. This will generate a $2.7 billion increase in net income to the program over the next 10 years.
  • Policyholders will be allowed to pay in installments instead of one lump sum.
  • Full actuarial insurance rates for newly mapped properties starting at 20 percent in their first year and increasing by 20 percent each year thereafter.
  • Communities making adequate progress in the construction of their flood protection systems can qualify for the lowest possible chargeable risk premiums for up to five years, meaning that the rates they pay during construction will be set at the level they would be paying once their dams and levee projects were complete. Certain communities close to achieving that adequate progress standard may qualify for two additional years of the lowest possible rates.
  • Creates the Technical Mapping Advisory Council to review flood hazard risk mapping standards and propose new mapping standards to FEMA. As FEMA adopts those recommendations, local communities may request to be remapped based on those standards.
  • Creates an emphasis on encouraging greater private sector participation in providing flood insurance coverage.

Here is a more detailed section-by-section summary of the flood bill that Congress passed. Please note that many of the provisions are subject to regulatory interpretation and implementation. PIA will work with FEMA on those parts.

The reforms contained in the new flood bill are projected to generate an additional $2.7 billion in new revenues over 10 years, according to the Congressional Budget Office.

Read the entire summary of the flood bill: Biggert-Waters Flood Insurance Reform Act of 2012 Conference Report (as passed)

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