[StBernard] FSC Website Update- Press Release

[Westley Annis]

House of Representatives Approves Flood Insurance Reform 

  

Washington, DC -- The U.S. House of Representatives today passed H.R. 3121,
the Flood Insurance Reform and Modernization Act of 2007, by a vote of 263
to 146.  The legislation reauthorizes the National Flood Insurance Program
(NFIP), provides for reforms to the NFIP, improves flood mapping, and
expands the NFIP to provide for multiple peril coverage. The bill
reauthorizes the NFIP for five years through 2013 (the current authorization
for the NFIP expires September 30, 2008) and ensures its continued viability
by encouraging broader participation, increasing financial accountability,
eliminating unnecessary rate subsidies, and updating the flood insurance
program to meet the needs of the 21st century.

"Flood insurance reforms are needed because, as we have seen, storms will
become stronger and more intense, and we need a program that can contend
with the worst that Mother Nature can throw at us," said Rep. Maxine Waters
(D-CA), Chairwoman of the Financial Services Subcommittee on Housing and
Community Opportunity and sponsor of H.R. 3121.  "Simply put, we cannot let
another hurricane season pass without putting the National Flood Insurance
Program on solid footing." 

"Passage of this legislation will ensure that in future disasters homeowners
won't have to hire lawyers, engineers, and public adjusters to prove what
damage was caused by wind and what was caused by flooding," said Rep. Gene
Taylor (D-LA), a co-sponsor of the bill.

            "We have made significant improvements in the National Flood
Insurance Program to ensure its continued viability to serve people, and to
limit taxpayer exposure to the program and provide for actuarial soundness,
said House Financial Services Chairman Barney Frank (D-MA).  "I want to
particularly commend Congressman Gene Taylor for his tireless work in
passing a budget neutral wind insurance program-a problem that was exposed
by the 2005 hurricane season."

In an effort to make the NFIP more actuarially sound, the bill phases out
subsidized rates on commercial properties, vacation homes, and second homes
built before 1974.  Multifamily rental properties are excluded from the
phase-out of the subsidy.

Additional optional policy coverage is added, allowing business owners to
purchase business interruption coverage at actuarial rates to better prepare
them to meet payroll and other obligations during the next big storm.
Additionally, optional coverage at actuarial rates for basement improvements
and replacement cost of contents is added.  For the first time since 1994,
the bill updates maximum insurance coverage limits for residential and
nonresidential properties.

The bill requires FEMA to conduct a thorough review of the nation's flood
maps.  The bill makes the updating and modernization of flood maps an
ongoing process, and increases funding for mapping.   The bill also
authorizes the Technical Mapping Advisory Council made up of industry
professionals to advise FEMA on flood mapping.

Provisions protecting policy holders include clarification of disclosures
about flood insurance availability and plain language information on flood
insurance policies.  Landlords must notify tenants of contents coverage
availability.  Further, the bill makes flood insurance effective immediately
upon purchase of a home.  

To encourage participation in the NFIP, the bill provides for a new
community outreach program, and provides for a study of how to increase
participation by low-income families.  In order to help ensure that those
homeowners who should have flood insurance do have flood insurance, the bill
increases the fines on lenders who do not enforce the mandatory flood
insurance policy purchase requirement for those who live in a floodplain and
hold a Federally-backed mortgage.

H.R. 1852 also requires FEMA to report to Congress annually on the financial
status of the NFIP, increases the amount FEMA can raise policy rates in any
given year from 10 percent to 15 percent, and authorizes funding for
additional staff at FEMA to carry out the requirements of this bill.

In addition, Chairman Frank offered a manager's amendment today striking the
provision in the bill increasing the NFIP borrowing authority by $725
million.  The amendment, as adopted, will bring the bill into compliance
with PAYGO.  The NFIP does not need the borrowing authority increase to pay
claims.  The NFIP currently has approximately $3 billion in borrowing
authority.  

H.R. 3121 was reported by the Financial Services Committee to the full House
on July 26, 2007.

 

 

http://financialservices.house.gov/