House Clears Bill Reauthorizing NFIP Program For 5 years

She added, "This legislation restores stability to NFIP which it lacked while subject to lapses and only temporary extensions. During lapses in the flood insurance program over the past year, FEMA was not able to write new policies, renew expiring ones or increase coverage limits."

However, passage was not without controversy, and in one case the debate generated an angry outburst from Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, the panel that reported out the bill in May.

The insurance industry's major concerns involved the decision of the full House to amend the bill to require Write Your Own insurers to agree that they will not use "anti-concurrent causation" language to exclude coverage of wind damage simply because there is also flood damage to the property.

This led the American Insurance Association to say it now opposes the bill.

The AIA statement also cautioned that it is uncertain that the Senate will even consider any NFIP reauthorization bill this year.

"If they do not, we will be working to enact an extension into the next Congress when the current one expires Sept. 30," said Blain Rethmeier, an AIA spokesman.

In voicing opposition to the anti-concurrent causation amendment, the Property Casualty Insurers Association of America cautioned members about the implications of the provision.

The PCI said the amendment would require a WYO company to rewrite their insurance contracts to address the concurrent causation issue, "putting those companies at an increased risk of loss.

"This would create a competitive disadvantage for those WYO companies who support the NFIP and threatens to force private insurers out of the WYO market," PCI said.

Leigh Ann Pusey, AIA president and CEO, said the amendment would negatively impact WYO companies and significantly alter the way in which claims are processed by the NFIP.

"Adopting the Taylor amendment would force WYO companies to take a hard look at whether they want to continue participating in the program and could actually result in a reduction in NFIP payouts to policyholders even when they are warranted," she added.

The provision that generated Rep. Frank's rebuke would authorize the Federal Emergency Management Agency, which administers the program, to spend up to $250 million annually to response to consumer requests for information about their status in the program, and whether they are subject to higher rates through remapping, for example.

Rep. Jeb Hensarling, R-Texas, submitted a motion at the end of the debate on the measure to recommit the bill to the House Financial Services Committee to remove the $250 million reauthorization because it was an unnecessary expense.

But Rep. Frank was highly critical of Rep. Hensarling's motion and Ms. Waters also defended the decision, saying members of Congress field any number of calls dealing with the NFIP and its provisions.

The motion was defeated in a party-line vote, 191-229.

Amongst other provisions, the bill reforms the program by phasing in market rates.

And an amendment added to the bill on the House floor addresses the key issue of repetitive claims by phasing in actuarial rates for severe repetitive loss properties and those with substantial damage.

The bill does not contain a provision adding wind to the program, which was a key concern for the insurance industry.

An amendment that would have added wind to the program was ruled out of order before the House voted on the bill.

At the same time, the bill is silent on dealing with the current NFIP deficit of more than $18 billion.

The bill also seeks to end criticism of prior reform that mandated increases in rates based on new mapping.

It does so by providing premium discounts for 5 years to assist consumers in newly designated flood hazard areas who are now subject to a new requirement to purchase flood insurance.

It also phases in rates for properties that were not previously in the flood plain.

Other provisions includes one extending the severe repetitive loss grant program to allow the government "buy-out" of properties with frequent and severe losses to reduce NFIP losses in the long term.

It increases the coverage limits available for residential and commercial properties, which have not changed since 1994.

The new bill also deals with a provision of the 2004 legislation by phasing out subsidies for properties built prior to 1974.

The bill includes a phase-out of subsidized rates for non-residential, non-primary residences and certain other properties, but it limits premium increases for those coverages to 20 percent annually until the risk-based, actuarially sound rate is reached.

The bill includes language limiting to coverage $1,000 for additional living expenses for residential properties and allows for the purchase of additional amounts.

It also includes a provision added at the request of the Independent Insurance Agents and Brokers that provides an option to purchase business interruption coverage for an appropriate premium.

This was added by amendment at the May markup of the bill by the House Financial Services Committee because it would provide needed protection and could reduce FEMA/SBA payouts following a flooding event.

It also increases the minimum deductible to a more appropriate level to more accurately reflect private market deductibles.

It also allows for premiums to be paid in installments for lower-income property owners.

The bill also increases disclosure and establishes grants for outreach programs to increase awareness of the availability of flood insurance.