Bipartisan bill slows insurance increases
WASHINGTON — Louisiana Sens. Mary Landrieu and David Vitter are supporting new, bipartisan flood insurance legislation intended to delay many of the most onerous insurance premium hikes affecting homeowners.
The new Homeowner Flood Insurance Affordability Act, expected to be formally filed next week, would delay for more than two years the steep flood insurance rate increases predicted for older primary residences that had been grandfathered into the program years ago at much lower premiums. The delay would not apply to those residences that have flooded repeatedly.
The proposal also would delay the property sale “trigger.” The price increases, in some cases, would take place upon the sale of the home or business, which critics said would cripple the ability to sell the property.
The bill’s lead sponsors are U.S. Sens. Robert Menendez, D-N.J., and Johnny Isakson, R-Ga. Landrieu, Vitter and four other senators signed on as initial co-sponsors. They sent out a letter Friday to other senators seeking additional support before the legislation is filed.
“For some Americans, these premium rate hikes will force them out of their homes and could even erode entire neighborhoods or communities,” the letter states, noting homes will become unaffordable and unable to sell.
“For prospective homebuyers, the certainty that they will not see their rate dramatically increase simply because they purchased a home is critically important to maintaining property values,” the letter adds. “The targeted pause provided by this bill would prevent undue hardship on homeowners, stop home values from dropping and make the program stronger and more effective for years to come.”
The other senators on board thus far are U.S. Sens. Thad Cochran, R-Miss.; Jeff Merkley, D-Ore.; Heidi Heitkamp, D-N.D.; and John Hoeven, R-N.D.
The National Flood Insurance Program, or NFIP, was changed last year by Congress to make the program more financially self-sustainable. But, in doing so, many insurance rates are projected to increase substantially more than lawmakers expected.
The NFIP has been in financial distress with a loss of nearly $25 billion, largely due to payments made after hurricanes Katrina and Rita in 2005. Louisiana has nearly 500,000 NFIP policies and there are more than 5.5 million policyholders nationwide.
The newly-proposed legislation would provide more funding to the Federal Emergency Management Agency to complete a currently stalled affordability study on flood insurance. The bill would cause many of the insurance hikes to be delayed by two years after the completion of the affordability study.
The bill would authorize reimbursements for policyholders who successfully appeal how their properties are rated in federal flood maps and create a “flood insurance rate map advocate” within FEMA to help answer policyholders’ questions and lead them through the appeals process. The bill also helps FEMA credit communities that have locally funded flood protection measures in construction.
Some of the flood insurance rate hikes began going into effect the beginning of October.
The Oct. 1 trigger applied to properties — businesses, secondary vacation homes and homes that have been repeatedly flooded — that were grandfathered into artificially lower premiums for flood insurance before flood maps were created. Such affected policyholders will see 25 percent annual premium increases over a few years.
But such subsidized properties sold after July 6, 2012, when changes in the law first began being implemented, would not have their new rates phased in. That is because the rates for such subsidized residences are triggered all at once when a home is sold or the flood insurance policy lapses.
The new legislation is attempting to eliminate that trigger.
About 18,000 Louisiana policies will see immediate impacts: nonprimary residences, businesses and repetitive-loss properties built before the flood maps. Another 50,000 or so primary residences from before the 1973 flood maps are not affected until they are sold or the policy lapses, according to FEMA.
Many more policyholders not listed in high-risk flood zones will see rate hikes in a year or more as new flood maps are finalized. More properties will be listed in higher-risk flood areas in updated maps as homes lose their grandfathered statuses.
On the House side, U.S. Rep. Bill Cassidy, R-Baton Rouge, announced that the House Financial Services Housing and Insurance Subcommittee will hold a hearing on flood insurance on Nov. 13. The hearing was originally scheduled for earlier this month, but it was postponed because of the government shutdown.
“The attention the committee is giving this issue is another positive step towards our goal of addressing the affordability challenges surrounding flood insurance,” Cassidy said.