House Flood Bill Set For Rapid Action In Senate

"The bill before us today will make sure people who purchased their home only to see their premiums skyrocketed stay in their homes," she said. "They will see their premiums rise towards a sound rate but on a path that is much more affordable. And, we are taking steps [in this bill] to fix some of the mapping issues in the flood program."

Comments by key senators after the 306-91 House vote indicates the Senate will act rapidly to shove the House bill through the Senate, which passed its own version of legislation on Jan. 30, effectively tabling the comprehensive premium increases and mapping policy changes for the National Flood Insurance Program (NFIP) mandated by the 2012 Biggert-Waters Act. One industry lobbyist said he believes final action will take place by the end of the week.

Enactment of the new bill will force the approximately 84 write-your-own (WYO) companies that administer the program on behalf of the Federal Emergency Management Agency (FEMA) to act in an unprecedented fashion to revise the software used to send out bills and deal with other required paperwork issues.

One lobbyist experienced in NFIP administrative issues said—and indicated that he has told members of Congress the same thing—that revising the software needed to implement the changes will take months and cost the industry millions of dollars.

Strong Opposition

The apparent strong House support for the measure masked significant opposition to the legislation, both from some insurance industry officials (read the following story on 03/06 for further details) and conservative House Republicans.

Strong opposition to the bill was voiced on the House floor, for example, by Rep. Jeb Hensarling, R-Texas, chairman of the House Financial Services Committee. As chairman of that committee, Hensarling should have played a strong role in shaping any legislation that comes under his jurisdiction.

However, he was shoved aside by the House Republican leadership in the rush to complete the bill before the March 11 vote to fill a hotly-contested open House seat in the Clearwater, Fla. area that has become ground zero for the strident opposition to the rate hikes imposed by the 2012 bill.

One key takeaway from the vote is that the influence of the Tea Party on Congress could be waning. In retrospect, enactment of the 2012 B-W Act, with its imposition of actuarial rates for flood insurance that implied "lesser government," could be viewed as the high water mark for the Tea Party movement.

The strong opposition to the new rates implies that there is enough political support to re-establish the NFIP as a de facto entitlement program. Hensarling made that point clear in remarks on the House floor Tuesday. He said that passage of H.R. 3370, "At the end of the day forces roughly 96 percent of all Americans to subsidize the remaining four percent, regardless of income or need."

That means, Hensarling said, that, "the single mom in Dallas, where I live, who is working hard as a cashier at the Albertson's grocery store, may be forced to subsidize the flood insurance for some millionaire's beachfront vacation home. If that's not the definition of unfair, then I don't know what is."

Rep. Maxine Waters, D-Calif., ironically, a named sponsor of the 2012 law, which was obviously passed in the fervor generated by the Tea Party movement without a realization that the new rates exposed political deals going back to 1972, had a different view.  

"Passage of this legislation is a significant victory for the thousands of Americans who are facing unaffordable flood insurance premiums."

She said that, "I'm pleased we could come together and provide relief for working families dealing with skyrocketing insurance premiums, depressed home prices and the inability to buy or sell their home."  

Waters said the House bill strikes an important balance—addressing affordability concerns, bringing accountability to FEMA and protecting the stability of the NFIP. She said it "ends the dramatic increases caused by events such as property sales—and restores grandfathered rates for those who played by the rules and built their properties according to code.

"For families hit by unaffordable premium increases, this bill provides important relief in the form of a refund." Waters said. 

The lynchpin of the new pricing approach is language limiting yearly increase to 18 percent per year. It replaces language in the 2012 law mandating implementation of actuarial rates for all NFIP policies over 4 or 5 years, depending on the type of structure insured. It also instructs FEMA leaders, who oversee the federal flood insurance program, to "strive to minimize the number of policies with annual premiums that exceed 1 percent of the total coverage provided by the policy."

It's short of the absolute cap some Democratic lawmakers had sought, but at least puts Congress on record that FEMA, as it moves to price premiums to reflect actual risk, should find ways to avoid charging more than $2,000 on a $200,000 flood insurance policy. However, in its rush to roll back the rate hikes because of pressure from governors, state legislators, members of Congress in more than 22 states, Realtors, homebuilders and mortgage servicers, an industry official with long experience in working with the NFIP cautioned that the bill sets up FEMA as a scapegoat and that the bill was primarily designed to provide political cover for anxious members of Congress.

"Asking an agency to 'strive' is a new one for me," the lobbyist said. "It's sort of like saying 'try really, really, really hard'. If they were anywhere close to keeping rates at 1 percent of coverage, they wouldn't be having a problem in the first place."

A source close to Richmond said, "It's short of the absolute cap we wanted, but at least puts Congress on record that FEMA, as it moves to price premiums to reflect actual risk, should find ways to avoid charging more than $2,000 on a $200,000 flood insurance policy."

He also voiced caution with the language holding rates to an average increase of 15 percent. "As for the 15 percent, I need to look at that more closely.  I think it reads that the Sec 1308 properties have an absolute cap of 18% year over year but the 1,307 properties have the 'average' of no lower than 5 percent and no greater that 15 percent.

"This language would seem to continue the 'defect' that Sen. Mary Landrieu, D-La. identified in the earlier version," he said.

Those comments by Landrieu last week forced House Majority Leader Eric Cantor, R-Va., to delay action on the bill for one week while he negotiated new language with Waters and Rep. Cedric Richmond, D-La., who represents the New Orleans area.

Landrieu, however, said she would support the House bill, as did Sen. Robert Menendez, D-N.J., both key supporters of the Senate version of the legislation. That bill, passed Jan. 30, merely delayed implementation of the 2012 bill for four years.

"The compromise legislation the House passed tonight represents nearly two years of arduous work by a broad coalition of business groups, community leaders and individuals that has fought to stop draconian rate increases on homeowners," Landrieu said.

For his part, Menendez "signed off" on the House bill last night.

"As a result of improvements made during bipartisan negotiations, I'm very pleased that the bill being put forth in the House will end the most egregious problems with the flood insurance program and bring some real relief to thousands of homeowners who desperately need our help," Menendez said.  "I'm encouraged by this progress and hope we can bring the bill over the finish line very, very soon."

He adds that "the new and improved House legislation closely parallels" the Senate bill and "prevents skyrocketing rate increases."

The Florida Front

Florida interests were ecstatic. 

"The House's action on this flood insurance fix tonight is an important win in our fight to undo the unfair flood insurance rate hikes that are hurting Florida families," Gov. Rick Scott said. "This legislation will help to ensure the long-term viability of the NFIP by establishing a reasonable glidepath to rate adequacy without causing undue harm to its real estate market and continuing economic recovery."

Sen.  Bill Nelson, D-Fla., a powerful Senate member who was formerly state insurance commissioner, added that, Although it doesn't go as far as the bill we passed in the Senate, it's good the House has approved some curbs on flood insurance.  For the sake of policyholders facing massive rate hikes, I hope we can get a final version sent to the president quickly."