Van Hollen, Menendez, Cassidy Introduce Bicameral, Bipartisan Bill to Reform National Flood Insurance Program

Today, U.S. Senators Chris Van Hollen (D-Md.), Bob Menendez (D-N.J.), and Bill Cassidy (R-La.) introduced bipartisan, bicameral legislation to extend the National Flood Insurance Program (NFIP) for five years, while implementing a series of sweeping reforms to address the waste, abuse and mismanagement plaguing the system. Over five million Americans depend upon the NFIP. Congressman Frank Pallone, Jr. (D-N.J.) sponsored the bill in the House of Representatives.

The National Flood Insurance Program Reauthorization and Reform Act tackles systemic problems with flood insurance, puts it back on solid fiscal ground, and reframes the nation’s entire disaster paradigm to one that focuses more on prevention and mitigation in order to spare the high cost of rebuilding after flood disasters.

Risk Rating 2.0, the Federal Emergency Management Agency’s (FEMA) new rating system, went into effect earlier this month, which is expected to raise premiums on 80% of NFIP policyholders nationwide. Around 900,000 policyholders are expected to drop their insurance because of the hikes. 

Joining Senator Van Hollen as a cosponsor for this legislation are Senators John Kennedy (R-La.), Cory Booker (D-N.J.), Cindy Hyde-Smith (R-Miss.), Marco Rubio (R-Fla.), Roger Wicker (R-Miss.), and Kirsten Gillibrand (D-N.Y.).

The National Flood Insurance Program Reauthorization and Reform Act provides:

• Long-Term Certainty.  Reauthorizes the NFIP for five years, providing certainty for communities.

• No Steep Rate Hikes under Risk Rating 2.0.  Protects policyholders from exorbitant premium hikes by capping annual increases at 9%. Currently, premiums can nearly double every 4 years and FEMA’s new methodology called Risk Rating 2.0 will fundamentally alter premiums on every policy in the country.  This new methodology plans to cause a rate shock and lead to unaffordability premiums, forcing homeowners to drop coverage or lose their homes. CBO and FEMA believe that Risk Rating 2.0 will cause nearly 900,000 policyholders to drop NFIP coverage due to the rapid premium increases.   We saw all too clearly the negative consequences of hiking premiums after the Biggert-Waters Act of 2012 caused costs to skyrocket, hurting policyholders and disrupting the real estate market.  This will put guardrails on FEMA’s new rating methodology, known as Risk Rating 2.0, and safeguard policyholders from sudden rate shocks while responsibly disclosing full flood risk.  

• Affordability for Low- and Middle-Income Policyholders. Provides a comprehensive means-tested voucher for millions of low- and middle-income homeowners and renters if their flood insurance premium become overly burdensome, significantly increasing the affordability of the NFIP program. 

• Path to NFIP Solvency. Freezes interest payments on the NFIP debt and reinvests savings towards cost saving mitigation efforts to restore the program to solvency and reduce future borrowing 

• Limits on Private Insurance Company Profits. Caps Write Your Own (WYO) compensation at the rate FEMA pays to service its own policies and redirects the savings to pay for the means-tested affordability program. 

• Increased Cost of Compliance (ICC) Coverage. Increases the maximum limit for ICC coverage to better reflect the costs of rebuilding and implementing mitigation projects. In addition, ICC coverage eligibility is expanded in order to encourage more proactive mitigation before natural disasters strike. 

• Strong Investments in Mitigation. Provides robust funding levels for cost-effective investments in mitigation, which have a large return on investment and are the most effective way to reduce flood risk.  

• More Accurate Mapping. Increases funding for FEMA’s flood mapping program to implement Light Detection and Ranging (LiDAR) technology for more accurate flood risk across the country, generating data that will lead to better building and land use. 

• Oversight of Write Your Own (WYO) Companies. Creates new oversight measures for insurance companies and vendors, and provides FEMA with greater authority to terminate contractors that have a track record of abuse. 

• Claims and Appeals Process Reforms Based on Lessons from Sandy. Fundamentally reforms the claims process based on lessons learned in Superstorm Sandy and other disasters, to level the playing field for policyholders during appeal or litigation, bans aggressive legal tactics preventing homeowners from filing legitimate claims, holds FEMA to strict deadlines so that homeowners get quick and fair payments, and ends FEMA’s reliance on outside legal counsel from expensive for-profit entities. 

A copy of the bill text can be found here. A copy of the bill’s section by section can be found here.