Filed Under:Markets, Reinsurance

After Years of Delays, Congress Passes Long-Term NFIP Extension

NU Online News Service, June 29, 3:01 p.m. EDT

Congress today finally passed and sent to the President legislation providing long-term certainty for the National Flood Insurance Program.

The House voted just before 2 p.m., 373-52, to pass the legislation, and the Senate voted a few minutes later, 74-19, to send the legislation to President Obama.

Under the bill, the NFIP is reauthorized until Sept. 30, 2017.

The flood portion of the bill is Title II of H.R. 4348, the Surface Transportation Extension Act of 2012.

The NFIP has been operating under temporary extensions since Sept. 30, 2008.

Until mid-day Wednesday, it appeared that final action on the flood bill would be held up until July.

But then the leadership of both the House and Senate decided to reconcile legislation that had passed by the Senate Banking Committee last September, and passed by the full House last July. They included the legislation in a single bill that extends the highway transportation program until Sept. 2014 and retains the current rate on student loans for one year.

The bill saw one final delay on Thursday due to demands by nine senators, led by Sen. Mark Pryor, D-Ark., that Sec. 107 of the Senate bill be removed from the legislation.

This section mandated that homeowners who live behind levees and other flood control structures buy flood insurance.

Under intense pressure, the Senate leadership agreed to remove the provision.

The final compromise merely allows Federal Emergency Management Agency to continue its ongoing analysis of how risk areas behind levees should be treated under the NFIP. 

 Key highlights of the legislation include allowing 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.

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

The bill also authorizes FEMA and the Government Accountability Office to conduct a study on various options, methods, and strategies for privatizing the NFIP.

Furthermore, it requires lenders to accept non-NFIP backed flood-insurance coverage provided by a private entity if that coverage meets all the same requirements as NFIP-backed flood insurance.

Additionally, the legislation does not include language expanding NFIP insurance to include additional living expenses and business interruption lines of coverage, provisions that had been debated previously.

Language in the House bill that would force FEMA to return the approximately 800,000 flood properties formerly serviced by State Farm to the private sector was also deleted.

The bill does contain a compromise language on the controversial wind-v-water amendment.

The final provision, negotiated by Sen. Roger Wicker, R-Miss., calls for hurricane data collected by the National Oceanic and Atmospheric Administration in conjunction with engineering formulas to be developed by FEMA to double check flood-insurance claims on total-loss, “slab” properties.

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