Sweeping Changes to Flood Insurance Program Approved by House Panel

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By Brandon Ross

A House committee approved sweeping changes to the National Flood Insurance Program (NFIP), including removing barriers to private-sector flood coverage and changing the basis of premium calculations to focus on the replacement cost of structures.

The House Financial Services Committee approved five bills at a June 21 markup meeting that are part of a seven-bill package that would reauthorize the NFIP. The measures are aimed at increasing the solvency of the National Flood Insurance Program. Under the package, commercial properties would no longer be required to purchase flood insurance.

The plan is to consolidate the seven bills into one measure and bring that single bill to the House floor in July, Rep. Sean Duffy (R-Wis.), chairman of the Financial Services Committee’s Housing and Insurance Subcommittee, told Bloomberg BNA June 21.

The committee approved two of the measures June 15. With all seven bills now stamped by the committee, they head to the House floor for consideration. The package would reauthorize the NFIP for five years. The program expires Sept. 30.

A bipartisan proposal to protect taxpayers from fraudulent engineering firms and to improve the claims handling process, which was the subject of much criticism following Hurricane Sandy, was among the measures approved.

The bills approved at the markup were:

  •  H.R. 1422, the Flood Insurance Market Parity and Modernization Act, approved 58-0;
  •  H.R. 1558, the Repeatedly Flooded Communities Preparation Act, approved on a voice vote;
  •  H.R. 2246, the Taxpayer Exposure Mitigation Act of 2017, approved 36-24;
  •  H.R. 2565, to require the use of replacement cost value in determining the premium rates for flood insurance coverage under the National Flood Insurance Act, and for other purposes, approved 34-25; and
  •  H.R. 2875 the National Flood Insurance Program Administrative Reform Act of 2017, approved 58-0.
Votes on two of the contested bills—H .R. 2246 and H.R. 2565—were mostly split along party lines.

Democratic members voted against some of the measures because the net effect of the bills would result in higher prices to policyholders and harm the program, various Democratic members said.

Private Insurance Market Barriers Lifted

Some insurers quickly hailed the legislative package for allowing “write-your-own” companies—insurers that sell NFIP policies for compensation—to expand private coverage options.

“The elimination of the non-compete clause for [write-your-own] companies, clarification that private policies are acceptable for meeting mandatory purchase requirements, and [the Federal Emergency Management Agency’s] sharing of historical loss data are all prerequisites for private companies considering offering flood coverage,” the National Association of Mutual Insurance Companies (NAMIC) said in a June 21 news release.

The proposed changes would help taxpayers by lowering the NFIP’s exposure to some high-cost losses such as those from very expensive homes, flood-prone properties, and new properties built in flood zones, the NAMIC statement said.

“PCI [The Property Casualty Insurers Association of America] strongly supports the committee’s reforms that encourage the growth of a private, competitive flood insurance marketplace,” Nat Wienecke, PCI senior vice president, federal government relations, said in a news release.

The National Association of Realtors (NAR), however, said it remains concerned about one of the seven bills.

“Unfortunately, we have strong concerns over elements of the 21st Century Flood Reform Act that could lead to consumer confusion and market disruptions,” NAR President William E. Brown said in a June 21 statement. “It’s imperative that Congress work together to avoid a repeat of the challenges that emerged following the Biggert-Waters reauthorization in 2012.” The 21st Century Flood Reform Act was one of the two bills the committee approved on June 15.

To contact the reporter on this story: Brandon Ross in Washington at bross@bna.com

To contact the editor responsible for this story: Paul Hendrie at phendrie@bna.com

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