A bill that will reform the National Flood Insurance Program (NFIP) was recently passed by the House of Representatives.
H.R. 4973, the Flood Insurance Reform and Modernization Act of 2006 (FIRM), accomplishes several goals in fixing the much-maligned program, which is funded by premiums and administered by insurance companies. Under the new legislation, the Federal Emergency Management Agency (FEMA) may borrow up to $25 billion from the U.S. Treasury to cover claims and expenses from the NFIP, an increase of more than 20 percent.
In addition to increasing the amount available for claims, the bill requires FEMA to phase in actuarially sound premium rates for flood insurance on commercial and non-primary residences, such as second and vacation homes. It also enables FEMA to expand the flood insurance program to include new types of insurance — such as additional living expenses, business interruption, and additional contents coverage — not to mention higher dollar limits on the amount of coverage available.
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