Votes sought to cap flood insurance rate increases

A U.S. House Republican proposal aimed at limiting dramatic increases in the price of flood insurance could still contain language that would allow an unrestricted rise in premiums.

That’s the key point Monday in negotiations between House Republicans and Democrats, whose support is necessary if the bill is to get to a vote on Wednesday, as anticipated.

“Right now we’re waiting for the Dems to sign completely off. And although we’re very optimistic, the last I heard is there is still some vetting they’re doing on the bill,” said Rep. Bill Cassidy, R-Baton Rouge. “They are looking at it extremely close. But the fact is we have answered every question and frankly every objection they initially had was an improvement (to the bill) … so, I’m hoping their objections will be addressed.”

House leaders told him that the full House could vote on the proposal Wednesday.

Cassidy pushed for House Resolution 3370 to rid the Biggert-Waters Flood Insurance Reform Act of 2012 of provisions designed to make the program more financially sustainable, but which also caused some property owners to have to pay huge premium increases. The GOP proposal would repeal a provision that threatens high rates and preserves the “grandfathered” status for many homeowners currently benefiting from below-market rates.

The GOP proposal would allow increases in the policy prices but limit those increases to 15 percent to help the flood insurance program regain financial stability.

“The majority of the bill is very good but the 15 percent is an issue. It’s our understanding that good-faith efforts are underway to address that point as quckly as possible,” said Michael Hecht, president and chief executive officer of Greater New Orleans Inc., a regional economic development agency that lobbied for changes in Biggert-Waters, arguing that the rates would rise so high that many couldn’t afford the flood insurance policies and they couldn’t sell their homes because the policies were so steep.

Louisiana has nearly 500,000 flood insurance policies, and there are more than 5.5 million policyholders nationwide.

Democrats had questions about the 15 percent cap language. The 15 percent is calculated as the average of the price paid by policyholders in a certain category. But does that refer to the average premium price of property owners in a particular neighborhood? Or is the average taken nationwide? The results could mean that some policyholders could see increases far higher than 15 percent.

Rep. Cedric Richmond, D-New Orleans, said the measure “still doesn’t provide individual homeowners protection from unrestricted rate increases. We are working … to draft language that caps rate increases on individuals, which will bring much-needed predictability and peace of mind to policyholders nationwide.”

House Republicans are hoping to have the support of two-thirds of the 435 members, or 287 votes, to take the bill up without first sending it through a committee. The House has 199 Democrats, four vacancies and 232 Republicans, not all of whom are supportive of the measure.

Rep. Steve Scalise, R-Jefferson, said House leadership would poll its members, probably Tuesday night, and judge how much support there is for the bill.

The Republican majority of the House had blocked three votes on Senate-passed legislation, which would have delayed premium increases, saying that no provision was included to financially stabilize the National Flood Insurance Program. The NFIP carried a debt of about $24 billion.

Some congressmen say the flood insurance program needs to become financially sustainable. Coastal lawmakers from around the country counter that the 2012 changes to make flood insurance more fiscally sound have led to rates so high that few property owners could afford to pay them.

HR3370 would repeal Section 207, which would have raised the cost of flood insurance policies for those whose properties were grandfathered in at rates below the cost of the policies. The Republicans also want to abolish certain types of triggers, such as the sale of a home, that caused the rates to jump to what it should cost, called actuarial value.

The proposal also includes a $25 surcharge on all flood insurance policies for primary residents and about $250 for business properties and vacation homes. The money would go into a fund that would help pay claims. It would produce about $1 billion over 5 years and $2.3 billion over 10 years.