House approves overhaul for program providing insurance to those in flood-prone areas

House approves overhaul of flood insurance program

WASHINGTON — Some subsidies would be ended and a measure of financial health would be restored under a House-approved overhaul of a program that provides flood insurance to more than 5 million homeowners and businesses in flood-prone areas.

The legislation, which approves operations of the National Flood Insurance Program for five years, also allows for some premium and deductible increases as the program tries to recover from Katrina and other 2005 hurricanes that left it some $18.75 billion in debt to the U.S. Treasury. The measure passed 329-90 on Thursday.

The flood program, an arm of the Federal Emergency Management Agency, has for more than four decades offered affordable insurance to more than 20,000 communities that participate in flood damage reduction efforts and to residents in federally designated flood zones. It was created in 1968 because of the reluctance of private insurers to cover flood damage.

Congress has not updated the program since 1994. In the ensuing years the once-solvent program had to pay out some $17 billion in Katrina-related claims and had to deal with FEMA flood zone remapping that has thrust thousands of homes and businesses into areas where they are required to buy flood insurance.

Rep. Maxine Waters, D-Calif., the chief sponsor of the bill, said it helps reduce the sticker shock of FEMA remapping by delaying the mandatory buying of insurance for five years and then phasing in full premiums over another five years.

The legislation now goes to the Senate, where its fate is uncertain. Without congressional action on a long-term bill, the flood program has lapsed three times this year, and Waters said that during those lapses some 1,200 people a day were unable to close on home purchases in flood plains because FEMA could neither write new insurance policies nor renew old ones. The flood program is now running on a short-term extension that expires at the end of September.

FEMA press secretary Rachel Racusen expressed hope that Congress would pass a long-term measure that would strengthen and improve the program. “This program is critical for Americans who need to protect their homes, businesses and livelihoods from flooding,” she said.

The bill would phase out subsidies now available to some vacation homes and second homes and nonresidential properties and would also eventually end subsidies for severe repetitive loss properties.

Rep. Shelley Moore Capito, R-W.Va., noted that properties in areas repeatedly hit by floods account for about 1 percent of all policies but about 30 percent of claims.

The bill raises the annual limitation on premium increases from 10 to 20 percent, raises annual deductibles and raises maximum coverage limits to $335,000 for residences and $670,000 for businesses. Currently the average annual premium is about $570.

The program now has some 5.6 million policies with an insured exposure of $1.2 trillion.

Among those opposing the bill were Rep. Candice Miller, R-Mich., who said her state “feels like the ATM machine for this flood program.” Miller, who said Congress should create a national catastrophic fund, said Michigan residents have paid out $200 million in premiums since 1978 while receiving only $44 million in claims.

Rep. Gene Taylor, D-Miss., also complained that he was denied a chance to add windstorm coverage to the program. Gulf Coast lawmakers say private insurers avoided paying claims for wind damage after Katrina by asserting that property damage, even in inland areas, was caused by federally covered floods rather than wind.

Both the Bush and Obama administrations have resisted adding wind coverage, saying it would greatly increase the insurance program’s risk exposure.

Taylor did win acceptance of an amendment requiring private insurers contracted with the flood program to make fair adjustments when a property suffers both wind and flood damage.

American Insurance Association President Leigh Ann Pusey praised the original bill, saying it improves the program and promotes fiscal soundness. But she said the AIA opposed it with the Taylor amendment, contending it would force some insurance companies “to take a hard look at whether they want to continue participating in the program.”

The bill is H.R. 5114.

Online:

Congress: thomas.loc.gov