US Senate clears flood bill to prevent rate increases
The US Senate has cleared a bill which will prevent the proposed flood-insurance premium increases for areas including Florida, Louisiana and New Jersey, which could have seen home owners face a 25 percent rate increase annually.
The bill, H.R. 3370, would limit increases to 15 percent of the average rate in a particular flood zone or 18 percent for each individual policy.
The situation surrounding US flood insurance premiums was topical at last week’s SIFMA Insurance and Risk Linked Securities conference, where key speaker Edward Connor, the deputy associate administrator of the Federal Insurance and Mitigation Administration Federal Emergency Agency (FEMA), spoke of the problems that steep increases cause to policyholders, lenders and real estate and revealed that as an agency, FEMA was in the process of sending out the first rate increase letters.
“The Senate has taken up the 2012 bill in a bid to try and undo some of these changes, but as an agency, we are still obligated to enforce the law,” he said.
The 2012 mandate to increase flood insurance rates to a level more in line with the true costs was enforced last year in a bid to cut the National Flood Insurance Program (NFIP) fund’s debt by $24 million.
NFIP has 5.6 million policyholders and services 22,000 communities, with New York, New Jersey and Texas among its largest supported areas.
The version passed by the House was a compromise by Republican leaders and Democrats led by California Representative Maxine Waters, the top Democrat on the House Financial Services Committee.
Connor also spoke of FEMA’s proposed plans to encourage privatisation of the NIFP, saying that the fund was only ever designed as a temporary solution which would ultimately provide a pathway for flood risk to be passed into the private sector.
“The NFIP wasn’t designed to be around forever,” he said. “The idea has always been to pass this over, but so far it hasn’t happened as the private sector doesn’t want to compete with the federal government rates or take on risks that it doesn’t need to.”
