Flood Insurance Rate Revision Bill Passes Committee

WASHINGTON--Legislation calling for the phase-in of actuarial rates for flood insurance on higher-priced homes built before the National Flood Insurance Program went into effect was passed unanimously today by the House Financial Services Committee.

The bill would require any purchaser of a primary residential home costing $600,000 or higher built before the flood program went into effect to pay phased-in actuarial flood insurance prices using the same phase-in structure as that of nonresidential and nonprimary home purchasers.

Currently, NFIP home insurance rates are subsidized and below what they would be if they were actuarially sound and competitively priced based on the true risk exposure.

The bill, H.R. 3959, was sponsored by Rep. Scott Garrett, R-N.J., and Rep. Barney Frank, D-Mass., chairman of the panel.

It calls for the phase-in to take effect in 2011, if adopted.

According to its sponsors, it would have the effect of not subjecting current homeowners of homes purchased before the NFIP went into effect to unanticipated or unplanned increases in flood insurance premiums.

Justin Roth, a senior director of federal affairs at the National Association of Mutual Insurance Companies, called the legislation "a positive step in the rightdirection."

He said the move is similar to phasing in all second homes to actuarial rates, and it "helps move the program in the right direction in which homeowners are paying risk-based pricing, instead of having all taxpayers subsidize their coverage."

Charles Symington, senior vice president for government affairs at the Independent Insurance Agents and Brokers of America, said the bill is consistent with the trade group's views on how to make the program more solvent and equitable.

"We hope the full House will consider this legislation soon and that both the House and Senate will consider including it in their broader Flood Insurance Reform and Modernization legislation," he added.