A message from CAI’s Government & Public Affairs

Legislation has been introduced in Congress to delay increases in flood insurance premiums required by the Biggert Waters Flood Insurance Reform Act of 2012 (BW Act). The “Homeowner Flood Insurance Affordability Act” (HFIA) sets aside substantial flood insurance rate hikes until the Federal Emergency Management Agency (FEMA) takes action to ensure homeowners have a reasonable ability to afford flood insurance coverage.
 
The BW Act requires that most properties insured through the National Flood Insurance Program (NFIP) be charged rates reflecting the full risk of flood loss. The premium increases apply immediately to flood insurance policies covering businesses and when residential properties are sold or a lapsed policy is renewed. Additionally, the BW Act requires that flood insurance rate maps be updated on an expedited schedule.
 
Due to BW Act reforms, many homeowners are facing significant increases in their flood insurance premiums. The increases can be so substantial that owners can no longer afford to maintain flood insurance coverage. This is a substantial problem for homeowners in areas where flood insurance coverage is required by federal law for mortgaged properties.
 
Additionally, many homeowners find their property has been designated as having a higher flood risk as a result of new FEMA flood insurance rate maps. FEMA has acknowledged that the agency’s flood insurance rate mapping methodologies are flawed and need to be improved. An example of the flawed process is that in many cases FEMA flood risk maps do not take into account state and local flood control projects. This forces communities and individual homeowners to pay out of pocket to challenge map inaccuracies while at the same time paying higher flood insurance premiums.
 
To help Congress better understand the impact of BW Act reforms, the law required that FEMA determine how flood insurance rate hikes would affect homeowners living in areas where flood insurance coverage is mandatory. The BW Act additionally required that FEMA study how substantial increases in flood insurance premiums would affect overall participation in the NFIP. Congress was seeking to determine if homeowners in mandatory purchase areas could afford very significant increases in flood insurance premiums and if the viability of the NFIP would be further threatened if higher rates resulted in fewer policies being written.
 
In a recent hearing of the Senate Banking Committee on implementation of the BW Act, FEMA Administrator Craig Fugate disclosed that FEMA has made little to no progress in studying how the BW Act impacts homeowners or the future viability of the NFIP.  While expressing some concern that homeowners will be unable to pay the new flood insurance premiums, Fugate stated that unless Congress changed the law, flood insurance premium hikes will go into effect as planned.
 
In response to Administrator Fugate’s comments, HFIA was introduced in the U.S. House of Representatives and the U.S. Senate (H.R. 3370 and S.1610, respectively). The legislation is drawing broad, bipartisan support in both chambers with H.R. 3370 having 119 cosponsors and 20 Senators cosponsoring S. 1610. CAI anticipates the number of cosponsors for H.R. 3370 and S.1610 will continue to grow as revised flood insurance rate maps become effective and more homeowners across the country face potentially unaffordable flood insurance premiums.
 
Despite strong support for HFIA in Congress, the legislation faces numerous obstacles. In the House of Representatives, key leaders on the Financial Services Committee have expressed opposition to HFIA as currently drafted. Numerous Senators have expressed similar concerns while other Senators are opposed to any substantive changes to the BW Act. This opposition makes it unlikely that HFIA will be adopted as a standalone measure in the near-term.
 
Notwithstanding this opposition, HFIA supporters in Congress continue to press congressional leadership for a vote on their legislation. A very likely outcome is that an amended version of HFIA will be attached to must pass legislation, such as legislation to fund the federal government or to reauthorize federal agriculture programs.
 
CAI’s Government and Public Affairs Department will continue to monitor the debate on flood insurance and HFIA. If you have any questions or comments, please send an email to government@caionline.org or call (888) 224-4321.
 
A section-by-section summary of HFIA is below.
 
Homeowner Flood Insurance Affordability Act of 2013
Section by Section Summary
 
Section 1. Short Title
The Homeowner Flood Insurance Affordability Act
 
Section 2. Definitions
Defines the following key terms—
»   Affordability Authority Bill—legislation considered under expedited procedures providing FEMA authority to issue regulations implementing premium affordability policies
»   Affordability Study—a study required by Biggert-Waters (BW) to assess the impact of increased premiums and affordability of flood insurance
»   Covered Structure—a residential structure that:
·         meets existing regulatory requirements defining exceptions for floodproofed residential basements, and
·         was constructed in compliance with applicable flood plain management standards
»   Draft Affordability Framework—a programmatic and regulatory framework to be developed by FEMA to address issues related to the affordability of NFIP policies and other affordability barriers identified in the Affordability Study
 
Section 3. Delayed Implementation of Flood Insurance Rate Increases; Draft Affordability Framework
Delays BW premium increases for—
»   Properties previously grandfathered under section 1308(h) of the National Flood Insurance Act (residential and business structures built to code but later remapped into a higher risk area)
»   Properties constructed prior to the existence of an applicable Flood Insurance Rate Map (Pre-FIRM) or where a policy on such properties was allowed to lapse due to such property not being required to obtain flood insurance coverage
»   Properties sold after the effective date of BW
 
 
Sunsets the delay in premium increases 6 months after the following dates, whichever is later—
»   The date on which FEMA proposes a draft Affordability Framework
»   The effective date of regulations issued pursuant to an Affordability Authority Bill, or
»   The date on which FEMA certifies to Congress the agency has implemented a flood insurance mapping methodology that utilizes sound scientific and engineering principles to determine flood risk in all areas participating in the NFIP
 
Restores risk premium subsidies for Pre-FIRM properties, non-primary residential properties, and severe repetitive loss properties
 
Requires that FEMA propose an Affordability Framework to resolve affordability and other issues identified in the BW Affordability Study. In completing the Affordability Framework, FEMA shall consider—
»   Accurate communication of flood risk to consumers
»   Targeting financial assistance to NFIP policyholders based on financial ability to participate in the program
»   Individual and community flood risk mitigation activities that lower flood risk or the cost of flood insurance
»   Impacts of premium increases on NFIP participation rates
»   Impact of flood insurance rate map updates on flood insurance affordability
 
Establishes an 18 month deadline for submission of the Affordability Framework to Congress and delineates expedited procedures for congressional consideration of legislation to authorize implementation of FEMA’s Affordability Framework
 
Requires that FEMA communicate information documenting the full flood risk of properties to individual owners participating in the NFIP
 
Section 4. Affordability Study and Report
Requires that the BW Affordability Study be completed within 2 years of the date of enactment of HFIA
 
Section 5. Affordability Study Funding
Removes the $750,000 funding cap for production of the BW Affordability Study
 
Section 6. Funds to Reimburse Homeowners for Successful Map Appeals
Authorizes FEMA to use NFIP premium income to reimburse homeowners for expenses related to successful appeals of FEMA Flood Insurance Rate Maps
 
Section 7. Flood Protection Systems
Establishes procedures for FEMA to determine progress in constructing or repairing non-federal flood protection systems
 
Section 8. Treatment of Floodproofed Residential Basements
Restores the flood insurance exception for floodproofed residential basements meeting prior FEMA regulations in specially designated areas where residential basements are necessary to protect homeowners from extreme weather
 
Section 9. Designation of Flood Insurance Advocate
Requires FEMA establish the position of Flood Insurance Advocate, whose primary responsibilities would involve—
»   Educating policyholders on flood risk, flood mitigation, and the rate map review and amendment process
»   Assist policyholders in understanding the appeals process for preliminary flood maps and implementing flood mitigation measures
»   Assist in developing FEMA capacity, on a regional basis, to respond to individual policyholder concerns about flood rate map amendments and to coordinate outreach and education of local officials in areas impacted by updated flood rate maps
 
 
CAI Government Affairs represents the interests of the 62.5 million people living and working in America’s community associations on legislative and regulatory issues at the local, state, and federal level of government. Contact CAI’s Government Affairs Department at government@caionline.org or (888) 224-4321 with any questions.

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