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Battle over NFIP Rate Hikes Causes Ripples in Louisiana Senate Race

The battle over rate hikes imposed on flood insurance program policyholders in Louisiana is intensifying, with the big prize being the Senate seat now held by Mary Landrieu, D-La.

Friday, the apparent strongest contender for Landrieu’s seat, Rep. Bill Cassidy, R-La., announced formation of a coalition of members of the Senate and House, sans Landrieu, whose objective is to seek a rollback or delay in some of the NFIP rate increases scheduled to go into effect in 2014 through the Biggert-Waters Act.

That announcement followed Landrieu’s failed attempt late Wednesday to get a vote on an amendment that would delay some of the proposed rate increases for five years.

After she was denied a floor vote on her amendment, Landrieu vowed a continued effort to at least delay the rate increases.

Mississippi Insurance Commissioner Mike Chaney also called for some relief for policyholders, “Both FEMA and Congress must find a solution to the pending high rate increases in the NFIP,” he says “No states are exempt and existing policyholders should be provided some form of relief from the draconian proposed increases.  

But some in the insurance industry point to the reasons behind the proposed increases, and note the importance of aligning rates more closely with the risks faced in certain parts of the country.

Jimi Grande, senior vice president, federal and political affairs for  the National Association of Mutual Insurance Companies, says, “The reforms passed under the Biggert-Waters Act were designed to strengthen the NFIP financially through a gradual move towards risk-based pricing, which would also provide property owners with a better understanding of the flood risk they are actually facing.”

He said the law provided for a phase-in of risk-based rates over five years, with an annual cap on rate increases of 20 percent for policy renewals.

“While it’s understandable that some property owners may be upset to find out how at-risk they are, delaying the reforms does not reduce that risk, and could weaken the NFIP’s ability to pay claims without having to borrow from the Treasury,” Grande says.

Currently, the NFIP owes $30.4 billion to the Treasury. The borrowing authority was raised 50 percent earlier this year, from approximately $20 billion, in order to pay for claims prompted by Superstorm Sandy.

The core of the battle is to retain existing rates for approximately 525,000 properties covered by grandfathering provisions that barred increases for those who purchased flood insurance before mapping began in 1974, or who were allowed to keep their rates when new maps showed there was increased risks of flooding in their communities. 

Until the reforms in 2012 mandated substantive increases in rates over five years, those rates stayed the same as long as the original owner retained the property.

In a statement during the debate over whether she should get floor time on her amendment, Landrieu explained the dilemma she faced when the 2012 reforms were voted on as part of a larger transportation bill. 

“Had the Biggert-Waters Act been brought for an up-or-down vote, I would have voted against it,” she said. Instead, it was part of the transportation bill, including the Landrieu-sponsored Restore Act, which directs 80 percent of Clean Water Act fines paid by BP and other responsible parties for the 2010 oil spill to the Gulf Coast.

Wednesday night, Landrieu’s efforts to get a vote on an amendment that would delay the rate increases for five years was rejected under a unanimous consent agreement by Sen. Patrick Toomey, R-Pa.

Then, on Friday, Cassidy announced creation of a bi-cameral, bi-partisan group in Congress called the Congressional Home Protection Caucus.

It includes a number of senators and members of Congress affected by Hurricanes Katrina and Rita, as well as Superstorm Sandy.

Its objective is to delay or stop premium hikes imposed by the Biggert-Waters legislation.

The only person not included in Cassidy’s caucus of Louisiana, Mississippi, New Jersey and New York members of Congress is Landrieu. 

Cassidy is even enlisting civic leaders in New Orleans in his coalition. Ironically, the mayor of New Orleans, Mitch Landrieu, is Mary Landrieu’s brother.

In a statement, Cassidy said the express goal of the Caucus is to promote market-based solutions to make flood insurance affordable for coastal communities.

“This bi-partisan coalition will fight for real, common-sense solutions to protect homeowners and their investments,” Cassidy said.

“I’ve been actively talking with folks across Louisiana and one thing is clear – folks are outraged by the magnitude of the potential rate increases. One of my top focuses in the Senate right now is working for a solution.

“We must make sure that people who have been following the rules aren’t priced out of their homes because their flood insurance rates increase so dramatically,” Cassidy said.

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