June 17, 2013
Biggert Waters reformed the National Flood Insurance Program (NFIP), which provides federal flood insurance to landowners in floodplains and is administered by the Federal Emergency Management Agency (FEMA). Biggert Waters included three key provisions that will affect insurance rates for property owners in special flood hazard areas (i.e., the “100-year floodplain” or regulated floodplain).
These amendments were put in place to ensure the solvency of the NFIP; at the time of passage, the program was approximately $20 billion in debt to the U.S. treasury (this amount increased to $30 billion after Hurricane Sandy).
Senator Mary Landrieu introduced the Strengthen, Modernize and Reform The National Flood Insurance Program (SMART NFIP) bill, SB 996, which would delay the premium rate increases required by the amendments to Sections 4014 and 4015 of the National Flood Insurance Act. Rate increases would be delayed 180 days until submission of the report on affordability as required by section 100236(c) of Biggert Waters.6 Additionally, Section 4 of SB 996 requires FEMA to conduct a study assessing “options, methods, and strategies for making available voluntary community-based flood insurance policies through the National Flood Insurance Program.”
SB 996 also includes an amendment to the statute that governs the expenditure of disaster relief funding administered by FEMA—the Robert T. Stafford Disaster Relief and Emergency Assistance Act (“Stafford Act,”42 U.S.C. 5172 et seq.). Section 5 of the bill would remove current restrictions on the use of federal funds to construct facilities in coastal high hazard areas. The amendment would allow reconstruction of facilities where relocation is not feasible, provided that the construction meets strict building standards, an equivalent of land in the coastal high hazard area is deed restricted as open space, and an emergency evacuation plan is in place. For an analysis of the challenges and opportunities for using disaster relief funding to adapt public facilities, see the Georgetown Climate Center’s analysis of the Sandy Supplement Appropriation.
The House also passed an amendment to the Department of Homeland Security’s budget (H.AMDT.121,
amending H.R. 2217) on June 5, 2013, that would prohibit FEMA from using funds to implement the 42 U.S.C.A. § 4015(h) for one year. Section 4015(h) was added by Biggert Waters to allow FEMA to increase rates by 20 percent (as opposed to old provisions that limited FEMA to a 10 percent annual increase). Section 4015(h) also allows FEMA charge actuarial rates for properties newly added to special flood hazard areas as a result of map updates (rather than grandfather these properties into subsidized rates, which was required allowed prior to the Biggert Waters reforms). FEMA is in the process of rolling out new FIRMs, which have not been updated in 25 or more years in many communities. In some places this is causing a dramatic expansion of properties now subject to NFIP requirements (including requirements to purchase insurance and comply with minimum floodplain regulations). These property owners will now have to purchase flood insurance and may have to pay high rates because their structures are not appropriately elevated.
Two other stand-alone bills have also been put forward in the House:
H.R. 960: Flood Victim Premium Relief Act of 2013, introduced on March 5, 2013 by Rep. Michael Grimm [R-NY11] seeks to roll back the Biggert Waters amendments to Section 4015(h) of the National Flood Insurance Act by extending the premium increase time from five years to eight for primary residences in areas that have been declared a federal disaster area after July 6, 2012. This bill is primarily designed to limit rate increases on victims of Hurricane Sandy.
H.R. 1267: Flood Insurance Premium Relief Act of 2013, introduced on March 19, 2013, by Rep. Steven Palazzo [R-MS4] also seeks to roll back the provisions of Biggert Waters that allow FEMA to increase premiums up to 20 percent per year over 5 years until rates are actuarial (42 U.S.C. § 4015). The bill would delay for one year any rate increases on newly purchased properties and properties affected by mapping changes. After the one year period, FEMA would only be allowed to phase in rate increases at a rate of 10 percent over ten years.
1 The Biggert-Water Flood Insurance Reform Act of 2012, Pub.L. 112-141 (H.R. 4348, 112th Cong.).
2 Id. at Sec. 100205, amending 42 U.S.C. 4104). Pre-FIRM structures that will be affected include second homes, business properties, sever repetitive loss properties, properties incurring flood damages that equals or exceeds the fair market value (FMV) of the property, and properties that are substantially damaged (greater than 50 percent of the FMV) or substantially improved (greater than 30 percent of the FMV.) Subsidies also cannot be extended when properties are sold to new owners, properties that were not insured or have a lapse in coverage after the enactment of the Reform Act, and insured owners of SRL or repetitive loss structures that refuse mitigation assistance after their structures are destroyed in a disaster.
3 Id. at Sec. 100205, 100207 and 100211, amending 42 U.S.C. § 4015
4 Base flood elevations (or BFEs) are shown for properties in special flood hazard areas on a community's FIRM. BFEs are the projected elevation to which floodwaters are anticipated to rise during the 100-year flood event (also known as the base flood). Newly constructed and reconstructed structures in special flood hazard area must be elevated to at or above BFE. Structures that are below BFE pay substantially higher insurance rates.
5 42 U.S.C. § 4015(h)
6 Section 100236 provides that
The Administrator shall conduct a study of –
1) methods to encourage and maintain participation in the National Flood Insurance Program;
2) methods to educate consumers about the National Flood Insurance Program and the flood risk associated with their property;
3) methods for establishing an affordability framework for the National Flood Insurance Program, including methods to aid individuals to afford risk-based premiums under the National Flood Insurance Program through targeted assistance rather than generally subsidized rates, including means-tested vouchers; and
4) the implications for the National Flood Insurance Program and the Federal budget of using each such method.
Section 100236 further requries a National Academies "economic analysis of the costs and benefits to the Federal Government of a flood insurance program with full risk-based premiums, combined with means-tested Federal assistance to aid individuals who cannot afford coverage, through an insurance voucher program."