Senator Charles Schumer (D-N.Y.) is advocating reauthorization of the National Flood Insurance Program ("NFIP"), which expires on September 30, and is supporting substantial changes to the program that are contained in a new bipartisan reform bill, the National Flood Insurance Program Reauthorization Act of 2019 (the "NFIP Re Act").
Senator Schumer said the legislative plan would extend the NFIP for five years and would "better protect policyholders from eye-popping rate hikes now on the horizon" based on the plan proposed by the Federal Emergency Management Agency ("FEMA") known as Risk Rating 2.
According to the senator, if the NFIP were to expire on September 30, it would eliminate the NFIP's authority to issue new insurance policies and existing policies only would be good until the end of the policies' terms. Moreover, he said, an expiration would restrict the NFIP's authority to borrow money from the U.S. Treasury in the event of an emergency, "crippling its ability to fulfill policy obligations should a major storm spur many insurance claims."
The NFIP currently covers approximately five million policyholders nationwide.
Senator Schumer explained that the NFIP Re Act would:
- Reauthorize the NFIP for five years.
- Cap annual premium increases at nine percent. (Currently, premiums can more than double every four years or less and, according to the senator, Risk Rating 2.0 would "fundamentally alter premiums on policies throughout the country," "could cause a rate shock," and could "lead to unaffordable premiums, forcing homeowners to drop coverage or lose their homes.")
- Provide a means-tested voucher for millions of low- and middle-income homeowners and renters if their flood insurance premium caused their housing costs to exceed 30 percent of their adjusted gross income.
- Freeze interest payments on the NFIP debt and reinvest savings towards mitigation efforts to restore the program to solvency and reduce future borrowing.
- Cap write your own ("WYO") compensation at the rate FEMA pays to service its own policies to pay for the means-tested affordability program.
- Raise the maximum limit for "increased cost of compliance" ("ICC") coverage and expand ICC coverage "to encourage more proactive mitigation before natural disasters strike."
- Provide funding for cost-effective investments in mitigation.
- Authorize funding for light detection and ranging ("LiDAR") technology for more accurate mapping of flood risk across the country.
- Create new oversight measures for insurance companies and vendors and provide FEMA with greater authority to terminate contractors that have a track record of "abuse."
- Reform the claims process based on lessons learned in Superstorm Sandy and other disasters, "to level the playing field for policyholders during appeal or litigation, ban[] aggressive legal tactics preventing homeowners from filing legitimate claims, hold[] FEMA to strict deadlines so that homeowners get quick and fair payments, and end[] FEMA's reliance on outside legal counsel from expensive for-profit entities."
- Provide for increased training and certification of agents and adjusters to reduce mistakes and improve the customer experience.
The bill's lead is Senator Bob Menendez (D-N.J.). It is cosponsored by Senators Bill Cassidy (R-La.), Cory Booker (D-N.J.), John Kennedy (R-La.), Elizabeth Warren (D-Mass.), Marco Rubio (R-Fla.), Kirsten Gillibrand (D-N.Y.), Jack Reed (D-R.I.), Chris Van Hollen (D-Md.), and Cindy Hyde-Smith (R-Miss.).
Learn more: S. 2187.
Steven A. Meyerowitz
Steven A. Meyerowitz, a Harvard Law School graduate, is the founder and president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. He may be contacted at [email protected].