With the U.S. Senate’s passage of legislation that would delay dramatic increases in flood insurance for up to four years last Thursday, Senator Jack Reed is hopeful of the measure’s passage in the House.
The Homeowner Flood Insurance Affordability Act, including an amendment introduced by Reed, gained passage by a bipartisan vote of 67-32.
“There are 180 co-sponsors in the House. There’s momentum,” Reed said in a telephone interview. Reed gave the legislation a good chance of passing since abrupt and dramatic increases in flood insurance premiums are being felt across the country.
“Throughout the country, they’re talking about it,” he said.
What also promises to get a lot of discussion is Reed’s amendment requiring the Federal Emergency Management Agency (FEMA) to study the possibility of making voluntary, community-based flood insurance policies available through the National Flood Insurance Program (NFIP). As Reed described it, communities would work with FEMA to arrive at premiums that would be reflective of actual experiences for that region.
According to a release issued by Reed’s office, “This kind of voluntary, community-based flood insurance plan could potentially give communities the option to purchase blanket policies for all properties in their communities or a portion of their communities. This could help localities to offer more affordable insurance policies to all their residents and provide greater incentives for community-wide mitigation activities to help reduce risk and insurance costs.”
Reed emphasized that his proposal is creative “and out of the box” and, for that reason, would need to be studied. He suggested it could take into consideration climate change and rising sea level, but the amendment has to spread risk as well as mitigate risk.
The Senate bill requires FEMA to complete an affordability study and develop recommendations for a policy to assist homeowners who cannot afford their premiums. The legislation also establishes a new Flood Insurance Rate Map Advocate within FEMA to answer current and prospective policyholder questions about the flood mapping process. The Rate Map Advocate will be responsible for educating policyholders about their individual flood risks, assisting property owners through the map appeals process, and improve outreach and coordination with local officials and community leaders, according to the release.
In 2012, the Biggert-Waters Flood Insurance Reform Act was enacted as part of the highway and transit re-authorization bill in order to prevent the NFIP from lapsing and leaving thousands of property owners without flood insurance. The law sought to phase out or eliminate federal subsidies for certain flood-prone properties to address the program’s growing debt, which is now $24 billion. Since taking effect last October, FEMA’s implementation of the law has raised concerns about potential premium increases on some properties, particularly in coastal states like Rhode Island.
With the phase out of federal subsides, and the complete loss of those subsidies to those who bought their homes after July, some Warwick homeowners are getting quotes as high as $32,000 for $250,000 of coverage that cost them about $4,500 before. A total of 1,871 Warwick homeowners carry flood insurance. Many more homes are within flood zones but do not carry insurance. Insurance is a mortgage requirement of properties within a flood zone. Premiums are based on the severity of the zone and the elevation of living space above base flood elevation.
“There’s always an annual increase in rates,” Reed said. “But instead of huge increases [if the bill is enacted into law], it goes back to [the] same trend line.” He said the measure would be retroactive, presumably meaning those who have already paid unusually large premium increases would receive rebates, although Reed wasn’t entirely sure of that. “At least, going forward, premium increases would be within [the] predictable expectations of the homeowner,” he said.
By law, the federal program may only borrow $31 billion from taxpayers to pay claims. Since 1978, the program has paid more than $117 million in claims in Rhode Island, with approximately $70 million in the last four years as a result of Superstorm Sandy and the historic floods of 2010.
Additional data provided by Reed’s office says more than 5.5 million people currently hold flood insurance policies in more than 21,800 communities across the country. According to a report by the Rhode Island Emergency Management Agency (RIEMA), there are currently more than 16,000 NFIP issued policies in Rhode Island (county-by-county breakdown: Bristol: 2,141; Kent: 2,439; Newport: 3,016; Providence: 2,668; Washington: 5,859) and the average premium in Rhode Island is $1,343 annually. About 6,800 of those policies are subsidized, according to FEMA. In general, FEMA and GAO have reported subsidized premiums represent only about 40 to 45 percent of the full flood risk.