Washington–Revised flood insurance reform legislation, including language allowing a gradual increase in rates for vacation home coverage, is set for action Wednesday by the House Financial Services Committee.
Included in the bill is a provision that gives the Federal Emergency Management Agency, which administers the National Flood Insurance Program, the authority to increase the annual limitation on rate increases from 10 percent to 15 percent annually.
A person familiar with the drafting process, who asked for anonymity, said that provision is designed to reduce the subsidy the program provides to consumers and deal more realistically with the debt burden imposed by recent catastrophes on the NFIP.
Meanwhile, the Senate Banking Committee has held hearings on ways the NFIP should be shored up, and its members appear set to propose a measure with more teeth in it than the latest House bill.
For example, members of the Senate panel said at the hearing that debt service on the huge loans that “twin sister” Hurricanes Katrina and Rita forced the agency to absorb, combined with annual losses, would be far too great for the current premium structure to absorb.
How the reform issue will play out is unclear, but the House bill will have insurance industry support. The Independent Insurance Agents and Brokers of America said yesterday–after the bill had been circulated amongst committee members and industry lobbyists–that it “strongly supports the bill.”
Charles Symington, IIABA senior vice president for government affairs and federal relations, said his group is also thankful the committee leadership–Reps. Mike Oxley, R-Ohio, chairman, and Barney Frank, D-Mass., ranking minority member–is seeking prompt action to raise the NFIP borrowing authority to $25 billion.
That additional money is needed so that companies and agents can promptly process claims on behalf of the NFIP.
However, before taking action on the portion of the bill increasing borrowing authority to $25 billion, Congress must first move on legislation that has passed the House but is awaiting action in the Senate raising the borrowing authority to $21.2 billion.
The House version of that legislation would increase the borrowing authority of the besieged program to $20.8 billion from $18.5 billion. Senate action on a companion bill raising the limit to $21.2 billion has been held up over other unrelated issues. When that passes, a conference committee will bring the two measures into agreement.
Besides calling for a phase-in of “actuarial rates” for nonresidential properties and nonprimary residences, the bipartisan House bill to be acted on Wednesday by the committee retains language in an earlier bill calling for a federal study of when homeowners should be required to buy flood insurance.
The new House bill also provides $100 million annually for 2007-2012 for flood mapping. The new bill also extends the life of a mitigation pilot program by two years, from 2009 to 2011.
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