Obama signs rollback of flood rate hike

Insurance bill eyes affordability and financial solvency

U.S. Sen. Mary Landrieu announced Friday that the president has signed into law the compromise flood insurance bill that rolls back dramatic increases in flood insurance rates.

“Today, draconian flood insurance rate increases have been stopped, and we have returned affordability as a centerpiece of the National Flood Insurance Program,” Landrieu, D-La., said in a prepared statement announcing that President Barack Obama had signed into law House Resolution 3370.

Known as the Homeowner Flood Insurance Affordability Act, the legislation was the product of bipartisan efforts to fix skyrocketing premium increases that came as part of an effort to put flood insurance on a financially sound footing.

“Our work is not done,” said Landrieu, who was praised for building the coalitions needed to pass the legislation. “Nothing is perfect. Nothing is permanent. We must continue our efforts to craft an affordable flood program that works decade after decade, so generation after generation can continue to affordably and safely live along our coasts and inland waterways where they work to power our nation’s economy.”

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

The new law limits rate increases for federal flood insurance policies to 18 percent per year. The law also restores grandfathering, which kept the rates below market prices on older properties and allows home buyers to keep the same taxpayer-subsidized policies that sellers had.

Amendments authored by U.S. Rep. Bill Cassidy, R-Baton Rouge, and U.S. Rep. Mike Grimm, R-New York, made up a large part of the legislation that was first passed by the House, then by the Senate last week and signed Friday by Obama.

“Isn’t that great,” said Cassidy, who was attending a ribbon-cutting at Fletcher Technical Community College near Houma when the bill was signed. “Good for the nation. Good for the state. Good for homeowners. And I have a little personal pride in it.”

The Grimm-Cassidy amendments threw out Section 207 of the Biggert-Waters Flood Insurance Reform Act of 2012. Biggert-Waters aimed at shoring up the shaky finances of the program by removing taxpayer subsidies.

Removing the language in Section 207 basically reinstates the flood insurance program’s grandfathering provision, meaning homes that complied with previous flood maps would not be hit with large increases when new maps are released showing a greater risk of flooding. It also ends a provision that required an immediate hike to actuarial levels when a home changes ownership.

The consequences of Biggert-Waters were that home sales essentially froze in many communities because few buyers were willing to accept annual flood insurance rates that, in some cases, would cost tens of thousands of dollars more.

“By repealing Section 207, restoring the grandfathered rate, removing the new home sale trigger ... all that served to restore equity in people’s homes,” Cassidy said.

The new law also provides refunds of premiums for people who purchased homes after Biggert-Waters became law in July 2012 but before the increased premiums took effect.

To pay for much of these rollbacks and refunds, all flood insurance policies will include an annual surcharge of $25 for primary residences and $250 for business properties and vacation homes. The money will go into a fund that will help pay claims. It will produce about $1 billion over five years and $2.3 billion over 10 years.

People whose second home is in a flood zone and those whose properties have flooded repeatedly will continue to see their premiums go up by 25 percent a year until they reach a level consistent with the properties’ real risk of flooding.

FEMA, or the Federal Emergency Management Agency, has eight months to draft the rules and procedures required in the law. But any transactions during that time that result in higher rates or prices will be refunded, according to the law.

Michael Hecht, president and CEO of Greater New Orleans Inc., on behalf of the Coalition for Sustainable Flood Insurance, released a statement that said, in part, “This law protects homeowners who played by the rules and keeps real estate markets alive while putting the NFIP on a more realistic path to solvency.”

“From the very beginning homeowners and small-business owners made their voices heard that the rate increases stemming from Biggert-Waters were causing unreasonable hardship,” said U.S. Rep. Cedric Richmond, D-New Orleans.

“Thousands of Louisiana homeowners can breathe a sigh of relief today because they now have some certainty that we’ve fixed a major problem with the National Flood Insurance Program,” said U.S. Sen. David Vitter, R-La.

The law:

  • Caps rate increases at 18 percent a year for homeowners.
  • Requires FEMA to strive to keep flood insurance policies under 1 percent of a property’s total coverage.
  • Mandates that FEMA review and report how new rates and surcharges impact small businesses, churches and nonprofits within 18 months.
  • Improves coordination and cooperation between communities and FEMA during the mapping process.
  • Allows language requiring that FEMA’s flood maps are accurate and reliable .
  • Reimburses individuals and communities that successfully appeal their FEMA flood map.
  • Credits local levees and nonstructural mitigation features in new FEMA flood maps.