Editor's note: Arthur D. Postal writes aweekly column for PC360 on insurance-related developments inWashington. Prevoiusly, he was National Underwriter'sWashington Bureau chief. Opinions expressed are the author'sown.

On Monday night, the Senate cleared for floor action legislationthat could delay implementation of most flood insurance premiumrate hikes for customers of the National Flood Insurance Program(NFIP) imposed by a 2012 bill for as many as four years.

The Senate brought the bill to the floor through rarely usedemergency procedures by an overwhelming 86-13 vote. Floor actioncould begin as early as Wednesday, industry officials said.

The legislation has prompted animated responses from bothsupporters and opponents. But, an industry lobbyist cautioned that“this was a very strong vote” to clear the bill for floor actionunder accelerated procedures that required the support of everymember of the Senate. “It would seem certain that they have thevotes to go all the way with this one,” the lobbyist said.

Given the strong vote on the motion to proceed, opponents of thelegislation said they hope the House will significantly modify thelegislation so that it imposes caps on annual increases.

Sen. Bill Nelson, D-Fla., alluded to that problem for thelegislation in a statement supporting clearing the bill for Senateaction. “The problem is going to be down at the other end of thathallway,” Nelson said on the Senate floor, referencing the House,according to a transcript. “Because the speaker of the House hasalready said that he doesn't like it, but what he's going to findout that he doesn't like is a lot of the members of the House ofRepresentatives whose constituents are facing tenfold increases intheir flood insurance.”

The bill is S. 1926, the Homeowner Flood Insurance AffordabilityAct of 2014 and National Association of Registered Agents andBrokers Reform Act of 2014. It would prevent flood insurancerate increases until the Federal Emergency Management Agency'smapping methods are certified as technically sound and anaffordability study is completed. The bill would keep in placephase-out of subsidized flood insurance premiums for vacation homesand homes that have a history of repeated flooding.

There are a number of amendments, including one aimed atfacilitating sale of private insurance. The amendment would clarifythat any private flood insurance policy accepted by a State shallsatisfy the mandatory purchase requirement under the Flood DisasterProtection Act of 1973.

It is aimed at responding to the concerns of commenters,including mortgage servicers, mortgage companies and the NationalAssociation of Insurance Commissioners, to a proposal by federalbanking regulators that seeks to make it easier for mortgageservicers to accept private insurance. The bank regulators proposedthe regulation because it is mandated under a provision of the 2012law.

Notable Amendments

Other amendments deal with consumer protection issues, such asforce-placed insurance, or deal with regional interests. Nineamendments have been proposed so far, but no agreement has so farbeen reached as to which ones will be cleared for floor action.

Two of the amendments deal with a sweetener added to the bill,one which would create a National Association of Registered Agentsand Brokers (NARAB). The White House also voiced concern with someparts of that provision.

Indeed, the White House immediately joined the battle last nightby voicing opposition to it and calling for more modest changes inthe 2012 law that the bill seeks to amend. The White Housestatement did not include a veto threat.

This prompted Sen. Mary Landrieu, D-La., to immediately fireback in a statement issued this morning.

“The Administration's short-sighted, misguided and irresponsibleStatement of Administration Policy threatens the very foundation ofthe NFIP and will only saddle taxpayers with higher costs whendisasters strike,” Landrieu said.

“How this Administration thinks it can 'ensure that economicallydistressed policyholders are not unduly burdened' before itcompletes the Affordability Study or certifies that its maps areaccurate and reliable is completely mind-boggling,” she said. “Thatis exactly the kind of backward and upside thinking that got usinto this mess in the first place,” Landrieu added.

The insurance industry opposes the legislation because it iscertain to add the ballooning deficit of the NFIP—now $24billion—and cast a shadow on winning congressional support forother legislative priorities, for example, reauthorization of theTerrorism Risk Insurance Act, which runs out at the end of thisyear.

Jimi Grande, senior vice president of federal and politicalaffairs for the National Association of Mutual Insurance Companies(NAMIC), said, “Through the amendment process, the Senate can movefrom its current plan to simply wipe away the much needed reformsof Biggert-Waters to a more balanced and targeted approach.”

Grande said that pushing back the move to risk-based premiumsfor flood insurance “doesn't reduce the cost of flood insurance; itforces every taxpayer to subsidize those homeowners facing real andserious risks from flooding.”

Lawrence Mirel, a partner in the Washington office Nelson Levinede Luca & Hamilton, said, “It is certainly understandable thatproperty owners become alarmed at the prospect of sharp increasesin the cost of flood insurance, and that their electedrepresentatives respond to their concerns.”

However, Mirel explained that someone must pay for the risk offlood, and if not those who own the property at risk, it will bethe taxpayers. “By slowing down the B-W reforms, Congress willensure that taxpayers will continue to subsidize property owners atrisk of flooding,” he said. “Major rethinking andrestructuring of the program is needed if it is to survive.”

There are also practical problems because the 84 Write-Your-Owninsurance companies that administer the program spent most of lastyear revising their software to reflect the rate hikes, whichbecame effective in October. “The vendor community doesn't like thebill because it will create massive IT changes and significantadditional costs,” said an industry lobbyist. “Plus, it would causemore confusion and potential accusations of unequal treatment.There is also concern that FEMA [the Federal Emergency ManagementAgency, which administers the program] will take a long time todigest the bill and provide direction to the WYOs,” he said.

The Senate put the bill on the fast track in response to strongopposition by both consumers affected by the cost of thelegislation, the Biggert-Waters Act of 2012, anddevelopment-related business interests. They feared it would retardthe nascent recovery of a housing market severely hurt by the2008-2010 economic downturn, and could lead to a new surge inforeclosures.

That's because the 2012 bill exposed political deals on floodinsurance subsidies dating back to the 1970s. The bill mandatedphase-in of actuarial rates on flood insurance rates over fouryears.

States from Hawaii to Vermont will be impacted by the 2012law.

According to the Tampa Tribune, only 20 percent offlood policies nationwide will see rates go up as part of B-W. But,Florida—and especially the Tampa Bay area—will be hit harder thanmost parts of the nation.

That's because homes built before communities entered the floodprogram and drew up floodplain maps in the early 1970s havereceived artificially low rates for decades; the federal governmentis eliminating those subsidies, the Tribune said.

The Tribune said that Pinellas County has the highestnumber of those older properties in the country, estimated at morethan 50,000, including condos and businesses, while Hillsboroughhas nearly 22,000 single-family homes alone being effected.

State officials in Louisiana estimate that the B-W could meanrate hikes of up to 4,000 percent on some Louisiana homes andbusinesses. There are nearly 500,000 flood insurance policies ineffect in the state, and an estimated 18,000 of them reportedlywill see an immediate impact, state officials said. Earlier, aLouisiana official estimated that 49 percent of the NFIP policiesin the state are subsidized.