House Dampens Prospects for Broad Flood Insurance Delay

The Senate (72-26) recently joined the House of Representatives (359-67) in passing a $1.1 trillion compromise omnibus spending bill that contains a delay for an estimated one quarter of those facing flood insurance premium increases triggered by the Biggert-Waters Flood Insurance Reform Act of 2012.

But prospects for a broader and longer four-year delay of flood insurance changes were dealt a setback when House leadership indicated it does not support a four-year delay.

The budget language on flood insurance would block the Federal Emergency Management Agency (FEMA) from spending any money for the remainder of this fiscal year (through Sept. 30, 2014) to enforce higher premiums under Section 207 of Biggert-Waters. This section ends current “grandfathered” subsidized rates for existing policyholders who are now facing premium increases due to remapping. These properties were built in accordance with building codes at the time of construction but are now considered to be out of compliance due to new flood maps.

President Barack Obama signed the omnibus spending measure into law.

A Senate bill (S.1846) to delay almost all of the 2012 reforms and resulting premium hikes for four years has been sidetracked but supporters have not given up.

In a tactical move, the Senate paired the flood insurance bill with the NARAB II bill (S.534 National Association of Registered Agents and Brokers Reform Act), which seeks to streamline agent licensing.

The Independent Insurance Agents and Brokers of America (Big “I”), the main group behind NARAB, supports the Senate flood bill and also supports the pairing of the two as a way to gain a vote on NARAB and bypass opposition to NARAB by Sen. Tom Coburn, R.-Okla. The move means both will either pass or die together in the Senate and then be taken up by the House as a package.

The Senate flood insurance bill is sponsored by Sen. Robert Menendez, D-N.J., and has 21 Democratic and 8 Republican co-sponsors.

Even if the Senate approves the package bill, it appears that the House will only consider a narrower fix to Biggert-Waters and that might take some time to negotiate.

Speaker John Boehner said the House will not consider a four-year delay in flood insurance reforms and premium increases, as the Senate is weighing.

However, Boehner said the House may consider some flood insurance changes “in the weeks and months ahead that both help homeowners and protect taxpayers.”

The House has a proposal that would delay rate increases for only six months. This bill (HR 3370) has 117 Democratic and 51 Republican co-sponsors but faces opposition from key Republicans including Rep. Jeb Hensarling (R-Texas), who chairs the House Financial Services Committee that has jurisdiction over flood insurance.

The Biggert-Waters act, which passed both houses in 2012 by wide margins, is an attempt to address the $24 billion deficit of the National Flood Insurance Program (NFIP) and place the program on sounder financial footing. Under the law, premiums subsidies are to be phased out and new flood maps drawn.

The Congressional Budget Office estimates that the Senate bill to delay the reforms would reduce net income to the debt-ridden NFIP by about $2.1 billion over the 2014-2024 period.

FEMA estimates that about 20 percent of its 5.5 million policyholders – about 1.1 million – receive subsidies. Under Biggert-Waters, about 250,000 of them will see immediate increases: business owners, those owning second homes and people with frequently flooded properties. Neither the budget language nor the Senate bill would delay these increases.

An additional 578,000 policyholders living in hazardous areas will retain their subsidies until they sell their homes or suffer severe, repeated flood losses. The budget provision does not change this provision but the Senate bill would block increases triggered by the sale of a home.

Sen. Bill Nelson, D.-Fla., supported the spending bill provision and the Senate bill for a four-year delay.

“We are still insisting that we are able to bring up the bipartisan bill to delay for several years the flood insurance hikes that in my state where 40 percent of the policies are,” Nelson said after the spending bill vote. “We have seen spikes by 10-fold of the rate on the flood insurance policies. Thank goodness there was in this omnibus appropriations a provision that would provide some partial relief for some homeowners facing huge rate hikes.”

Nelson said that spending fix is expected to help less than a quarter of all the flood policies facing rate hikes.

“That’s why we need to move forward with passing the broad bipartisan bill that will delay these hikes for several years while FEMA does an affordability study,” he said.

Meanhwile, opponents of a delay were buoyed by Boehner’s remarks.

“We applaud Speaker Boehner for rejecting proposals to further delay flood insurance reforms and hope that he will instead explore measured changes that will put a troubled program on a path to fiscal viability,” the smartersafer.org group said in a statement.