A step closer to lower flood insurance rates


Homeowners came a step closer to getting a reprieve from dramatic increases in flood insurance rates with U.S. Senate passage last Thursday of the Homeowner Flood Insurance Affordability Act.

The measure that passed 72-22 will put a cap on future rate hikes and provide refunds for certain homeowners who bought property after July 6, 2012 when the Biggert-Waters Flood Insurance Reform Act took effect. The bill, which the House has ratified, now goes to the President.

Mayor Scott Avedisian called the bill a “good stop-gap,” but not the ultimate solution. He said the bill should give Congress time to work on a long-term measure.

That’s preferable to what homeowners have faced since enactment of Biggert-Waters.

With implementation of that bill some Warwick homeowners were seeing meteoric increases in their flood insurance. The Beacon received reports of rates for the maximum $250,000 coverage going from $4,500 to $32,000. With 39 miles of shoreline, thousands of Warwick homes are within flood zones and subject to the requirement of flood insurance that is run by the National Flood Insurance Program for a mortgage. More than 1,800 Warwick homes have flood insurance.

Biggert-Waters was in response to the $24 billion debt faced by the flood insurance program. It phased out federal subsidies and required the Federal Emergency Management Agency to develop new rates for flood insurance premiums that more accurately reflect flood risk.

According to the office of U.S. Senator Sheldon Whitehouse, the bill passed Thursday holds down rates for struggling homeowners, including many who own property that was built before Flood Insurance Rate Maps were created in the 1970s and some who were mapped into a higher risk zone.

“This bill will provide relief to many Rhode Island homeowners facing sharp rate increases in their flood insurance policies,” said Whitehouse. “We must ultimately look for a path forward that puts the federal flood insurance program on solid financial footing, implements rates that reflect actual risk to properties, and does not put too much of a burden on homeowners. This bill establishes a process through which we can work toward that goal, and I’m glad we were able to pass it in bipartisan fashion,” Whitehouse said in a statement.

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.

Congressman Jim Langevin, who worked hard on passage of the bill in the House, was pleased with the Senate action, citing in particular that those who have already paid higher premiums would be eligible for rebates.

Langevin’s office provided the following summary of key provisions of the bill:

The bill repeals the property sales trigger, meaning sellers and buyers no longer need to worry about going to full risk at the point of sale. The buyer would assume the seller's subsidy. The bill also clarifies that properties newly mapped into a flood zone are protected by the 18 percent cap. Ensuring that no policyholder will experience dramatic rate increases from the sale of a home or a lapse in policy.

Individual property rate increase cap, when rate increases do occur, the first year would be PRP and then, upon renewal, FEMA’s authority to raise rates on that buyer would be capped at a 15 percent average within the risk class. At a maximum the rate increase would be 18 percent (on the previous year’s premium, as opposed to 20 percent of the difference between the current premium and the actuarial rate). Under FEMA’s annual increase authority, the average increase is capped at 15 percent. But without this individual cap, policyholders might still have experienced significant rate increases.

Restoration of “grandfathering,” so those who built properties to code in the past do not have to worry about catastrophic rate increases as a result of re-mapping.

Affordability study and framework. Provides FEMA the funding necessary to complete the affordability study mandated in the Biggert-Waters Act and requires FEMA to submit the study, along with an affordability framework, to Congress.

Affordability goals for FEMA. In addition to striving to achieve actuarial soundness in setting premium rates, FEMA is now instructed to minimize the number of policies with annual premiums that exceed one percent of the total coverage provided by the policy. (i.e., if you have $500,000 of protection your rates should not be greater than $5,000)

Protection of small businesses, non-profits, houses of worship, and residences. The measure requires FEMA to monitor and report on affordability for small businesses, non-profits, houses of worship, and residences with less than 25 percent area median home value. If FEMA finds detrimental effects on affordability, it must provide Congress recommendations to address these effects.

Lowering FEMA’s ability to increase rates, from 20 percent to 15 percent.

Mapping protections, requiring FEMA to notify communities and Members of Congress of re-mapping, mandating FEMA work with communities on appropriate data and mapping models.

Consumer protection, which ensures policyholders receive clear information relating to their policy following certain changes in their policies, such as opting for high deductibles or foregoing flood insurance on certain detached structures.


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