NFIP needs congressional reauthorization by September 30 this year, or the program will lapse.  Many people are clamoring about reauthorizing the NFIP program.  We need more than just reauthorization, we need true reform.  Since the disastorous Biggert/Waters Act congress has been “kicking the can down the road” and has not permenantly fixed the NFIP for the future.

 

We need a bill that will protect policyholders and not the WYO’s, fix the mapping errors, Keep flood insurance affordable, stop insurance fraud by the WYO’s / NFIP / Contractors, pay claims in a timely fashion and fix the overall financial health of the program.

 

Background on the Flood Insurance Bills;


Senator  Gillibrand – NY and Senator Cassidy – LA sponsored flood bill – 

It was policyholder friendly but did not garner any support in the house or Senate.  Only two Senators signed onto the bill.  This bill is most probably dead and won’t leave committee.

 

House Finance Services Bill (aka 7 house bills combined into the 21st Century Flood Insurance Bill, aka Rep. Hensarling’s – TX Bill ) –

 

This bill primarily has republican house support and was jammed through the house with little bipartisan support.  Recently key republicans have spoken out against this bill including Republican Whip Steve Scalese – LA  and Senator Kennedy – LA. read the full story here 

 

This bill ;

  • provides minimal protection from fraud, delays and underpayment of claims.

  • private flood insurance without any safeguards against “cherry picking”.

  • providing proprietary NFIP information, that is worth billions, to be shared with the private insurers for free.

  • private insurers to not pay mapping fees or other surcharges further undermining financial solvency to NFIP.

  • There are no safeguards or legislation to make sure the private insurers have sufficient funds to pay for a Harvey or Katrina like claim (They will just file for bankruptcy and the Federal Gov’t will be holding the bag).

  • Congressman Ross, from Florida, has been spearheading this private insurance push – he either is ill-informed or has received significant donations from the private insurance lobby.

  • Caps premiums at $10,000 a year! sponsored by Congressman Zelding – NY, whose district covers the Hamptons.  Mr. Zelding has no clue what a $10,000 premium will do the value of a $200,000 home.  It will render it worthless.  The flood premium would be more than the mortgage on the home.  Mr. Zeldin needs go use some common sense and back off this bill.  His defense is… at least we have a cap!   Congresswoman Waters pleaded to lower the cap, but Mr. Zeldin stayed firm at $10,000.  If you have an issue with Mr. Zeldin’s cap please call his office at (202) 225-3826.  Tell him to lower the cap to $5,000.

  • This bill also caps compounded yearly increase at 15% yearly and the minimum increase is 8%

  • Increases ICC to $60,000 (Premiums will rise an additional $75 on top of the cap)

 

 

SAFE Flood Insurance Act has bipartisan support; Menendez (D-NJ), Cochran (R- MS), Kennedy (R-LA), Rubio (R-FL),  Warren (D-MA), Van Hollen (D-MD),  Booker (D-NJ)

 

  • This bill has the most bipartisan support

  • Provides the most comprehensive legislation to eliminate fraud in the claims process and strips NFIP legal immunity against fraud.

  • Will make sure private insurers do not cherry pick, pay for proprietary information and have financial stability to pay large claims.

  • Caps increases at 10% annually.  No additional fees above and beyond the 10%.

  • Allocates over $6 Billion for mitigation efforts, by far the most amount of all the bills.

  • Will refund cost of elevation certificate through premium credit.

  • Will provide “means tested vouchers” if premiums become unaffordable

  •  Provides $800 million per year for flood mapping.  At least double the amount of any other bill.

  • Reduces WYO compensation to 22.46 %

  • Prevents the denials of claims because of “earth movement” issue.

  • Increases ICC to  $100,0000

 

Senator Crapo Bill –

 

This bill is virtually a blank slate bill.  The main element is  adds “wildfires on federal lands” in the definition of “major disasters” under the Stafford Act in the case of a presidential declaration of a major disaster.”    Why are homeowners/municipalities in “wildfire prone” areas not REQUIRED to purchase wildfire insurance?   Seems hypocritical for Crapo to want “welfare” for wildfires (100% disaster aid) but refuses to help NFIP, which defrays most of the cost of floods away from the Federal government.

 

The Crapo bill was hastily rushed out with no support to basically “Block” true flood insurance reforms from being instituted because it down not make sense that a fiscally conservative senator would want 100% subsidization for wildfires but would not want to subsidize a small portion of the NFIP.  He proposed this bill to “run out the clock on NFIP reauthorization so another “watered down” bill passes.  This bill has no support and is typical D.C. politics which needs to stop.

 

Below are the 3 Proposed flood insurance bills Compared side by side;

 

 

 SFN  Issues SAFE NFIP Act House Financial Services Crapo-Brown
Reauthorization ·       6 years ·       5 years ·       6 years
Premiums  

Rental assistance should be an option or included, until the claim is paid.

 

 

Attorney Fees should be paid by WYO if there is an underpayment is – 10% of actual amount due.  This should be retroactive to Superstorm Sandy.

 

 

 

 

·       Increases coverage limits from $250,000 to $500,000

·       Provides premium credit for obtaining an elevation certificate (Savings of $500 per elevation certificate per homeowner)

·       Excludes catastrophic loss years in HALY calculation (Standard actuary rate calculations not used by NFIP, this will reduce premiums )

·       Requires study on offering business interruption coverage

·       Authorizes use of RCV to calculate premium rates (This will lead to higher premiums, cost?)

·       Requires FEMA to consider inland vs. coastal risks in calculating rates (This will lead to discrimination and higher costs.  Whether Pacific coast/Atlantic Coast or Inland modeling – risk is risk)

·       Requires greater transparency in rate-setting (The private insurers are demanding actuary rate info and claims loss info from NFIP/WYO’s.  This information is worth Billions – why give it away to private industry?  Let them pay for it.  This will also lead to cherry picking – making NFIP less stable)

·       Eliminates mandatory purchase requirement for commercial properties ( If the property has a federally backed mortgage, it should be required to purchase flood insurance.)

·       Authorizes use of RCV to calculate premium rates (This will lead to higher premiums, cost?)

·       Requires study on offering business interruption coverage

Affordability ·       Provides for means-tested mitigation loans and premium assistance (This will prevent foreclosures for the financially at risk.  Otherwise the banks and FHA would take the financial hit)

·       Caps rate increases at 10% (this rate is the lowest increase of all bills) (THIS CAP RATE INCLUDES ALL SURCHARGES – ALL THE OTHER BILLS HAVE A 15% CAP THEN SURCHARGES ON TOP, THIS COULD EASILY LEAD TO 30% OR MORE INCREASES ON FLOOD PREMIUMS)

·       Freezes NFIP debt interest for 6 years, directs funds to affordability and mitigation  (This 2.4 Billion will help mitigate SRL and RL properties, bringing the NFIP program one step closer to being self sustaining)

·       Reallocates HFIAA surcharges to affordability and mitigation

·       Lowers cap on rate increases to 15%; raises the minimum increase to 8%.

(this cap is 50% larger than the SAFE Act.  We have to take into consideration the cost of the foreclosed homes to FHA).   (The 8% mandatory minimum is totally unacceptable.)

·       Authorizes states to create affordability programs (There is no funding for this program)

·       FEMA would recoup subsidy costs through a surcharge on all other policyholders in the state  (This surcharge will be added onto the premiums above the 15% cap, making flood insurance more unaffordable)

·       Communicates full-risk information to subsidized policyholders THIS INFORMATION SHOULD BE PROVIDED TO ALL POLICYHOLDERS.

·       No provisions
ICC Make all these ICC rules retroactive to Pre-Superstorm Sandy.

 

The goal is to mitigate as many SRL and RL homes in the NFIP Program.

 

Congressman Royce – CA – in recent congressional hearing stated “that the SRL problem is increasing by a factor of 10 compared to the mitigation dollars being allocated to the problem.” Watch here 

 

Congressman Trott – MI – “1.6% of Flood policy holders account for 24% of claims”  Watch here

 

·       Increases primary coverage to $100,000  (The cost will be an appropriation and not be added to premiums)

·       Exempts ICC payments from maximum payout limits

·       Expands eligible activities to include certain pre-disaster measures

·       Expands eligibility to all repetitive loss properties and to all policies outside SFHA if community ordinances specify standards for those properties

 

 

 

 

·       Maintains primary coverage maximum at $30,000 (This $30K has not been updated since the 1980’s.  This does not motivate/influence a homeowner to mitigate their home. )

·       Provides optional coverage up to $60,000.  (This cost will add an additional $75 to the cost of flood insurance above and beyond the 15% premium cap.)

·       Expands eligible activities to include certain pre-disaster measures  (SAFE ACT Allows more instances to use the ICC funds, pre-mitigation)

·       Expands eligibility to properties “at high risk of future flood damage”

·       (Does not exempt ICC payments from maximum payout limits

·       Increases primary coverage to $60,000 (This cost will add an additional $75 to the cost of flood insurance above and beyond the 15% premium cap.)

·       Provides optional coverage up to $100,000.  (This cost will add an additional $75 to the cost of flood insurance above and beyond the 15% premium cap.)

·       Exempts ICC payments from maximum payout limits

·       Expands eligible activities to include certain pre-disaster measures.

·       Expands eligibility to all repetitive loss properties and to all policies outside SFHA if community ordinances specify standards for those properties

 

Mitigation The SAFE Act allocates more than $6.4 Billion in Mitigation funding, without raising premiums (it is appropriated and reallocates interest payments to treasury).

 

House Appropriations bill allocates $1.3 Billion toward mitigation.  (This will add another surcharge above and beyond the 15% cap)

 

Crapo Bill ads $1.2 Billion for mitigation.    (Will this be funded by premium increases?)

·       Authorizes $1 billion for FMA

·       Authorizes PDM at $500 million annually for 6 years

(A total of 4 billion dollars for FMA and PDM mitigation)

·       Freezes NFIP debt interest for 6 years, directs funds to affordability and mitigation.

(The debt interest freeze will add another $400 million per year to mitigation programs, over 6 years = 2.4 Billion dollars.)

·       Reallocates HFIAA surcharges to affordability and mitigation  (This will not cause premium increases)

·       Requires flood hazard discourse for landlords/tenants

·       Allows premium credit for alternative or partial mitigation measures

·       Authorizes $225 million annually for mitigation assistance grants.  (Will this be funded by premium increases?)

·       Requires FEMA to clearly communicate full risks to all policyholders

·       Requires flood hazard discourse

·       Allows premium credit for alternative or partial mitigation measures

·       Authorizes PDM at $200 million for 6 years  (Will this be funded by premium increases?)

·       Requires flood hazard discourse

·       Allows premium credit for alternative or partial mitigation measures

Mapping TMAC has states that the flood maps have a +/- 40% accuracy.

 As we are moving toward homeowners paying an actuary rate, we should have more accurate flood maps to reflect true risk.

 

Funding for mapping is the only way to fix the mapping problems we are currently having across the country.

 We should expand the program FEMA started with NC, funding states to map their own states.  As FEMA is shifting the burden of disasters to states, the states should ultimately be responsible for the flood maps.

·       Authorizes $800 million/year for 6 years to map entire U.S. using remote sensing technology (i.e. LiDAR), and for creating digital display with structure-specific risk information.  (The structure specific risk information, in most cases, will eliminate the need for a homeowner to purchase an elevation certificate).

(If all 5 million flood policy holders needed an elevation certificate, at $500 each, the cost would be $2.5 Billion dollars that the flood policy holders would have to pay)  The difference in cost between Lidar Mapping and Lidar Mapping with Structure specific risk information is minimal.)

·       Directs TMAC to establish standards, guidelines, and procedures for state and local governments to develop alternative flood maps

·       Requires FEMA to use other risk assessment data/tools (in addition to maps) when determining rates

This bill does not allocate any addition funding for mapping. How will risk be determined?  How will premiums be determined?

·       Reauthorizes National Flood Mapping Program at $400 million annually.

·       Directs FEMA and TMAC to develop a “dynamic, database-derived digital display environment for flood hazard and risk data, models, maps, and assessments” with structure-specific risk information

·       Directs FEMA to include information on urban flooding and changing lake levels when updating maps

Private Market Private insurers are not regulated by the state.  They are surplus lines/carriers.  If there is any type of major disaster these insurers do not have the reserves to pay any substantial size of claim.

 The federal government will be holding the bag for the insurer’s default.

Private insurer’s need to pay for use of flood maps, actuary info and proprietary NFIP information.  This is worth billions.

·       Requires FEMA to charge private entities for using map products.   (Why would a private entity be able to use billions of dollars worth of mapping, for free?  ) ·       Allows private insurance to satisfy mandatory purchase and continuous coverage requirements

·       Requires FEMA to make NFIP data publicly available by zip code or census tract.  (This is proprietary information that has cost the NFIP policy holders billions of dollars to collect.  If this is made available, it should be paid for by the private insurers).

·       Eliminates non-compete clause with WYO’s

 

·       No provisions
Financial Soundness  If flood insurance is not affordable homeowners will either drop flood insurance coverage or lose their homes because of unaffordability. ·       Requires FEMA to conduct a study on participation rates (Since the passage of HFIAA almost 400,000 policies have dropped from the NFIP program – WHY?). ·       Requires FEMA to purchase reinsurance or to use other risk transfer tools

·       Raises HFIAA surcharge on primary residences

·       Raises Reserve Fund assessment

·       Requires an annual independent actuarial study of NFIP

·       Eliminates coverage for certain high risk properties (If a home is dropped then it will be foreclosed up.  What is the cost to FHA for these foreclosures.  How many of these high risk properties are there estimated to be?  What is the definition of high risk?)

·       Clarifies FEMA’s authority to cede NFIP risk to private reinsurance and/ or capital markets.  (Limited Re-Insurance is costing $100 Million a year.  Expanding this program could cost $500 million a year, or more.)

·       Requires Federal banking regulators and FEMA to conduct study participation rates annually

 

Claims Process NFIP needs to mitigate homeowners from spending money on hotels, eating out, shuffling kids to different schools, etc…  The claims determinations need to be completed immediately.  THIS IS AN EMERGENCY!

 

Total overhaul in protecting homeowners from fraud / underpayment of claims is needed.

 

 

·       Institutes 30-day deadline for claims determinations

·       Caps WYO compensation at 22.46%

·       Creates Agent Advisory Council

·       Makes reforms to contracting practices and the appeals process

·       Prevents denial of claims based on “earth movement” if caused by flooding

·       Authorizes pilot program for pre-existing structural conditions

·       Institutes 120-day deadline for claims determinations

·       Caps WYO compensation at 25%

·       Creates Technical Insurance Advisory Council

·       Makes reforms to contracting practices and the appeals process (this language is too broad, need specifics)

·       Authorizes pilot program for pre-existing structural conditions

·

·       No provisions

·       (There is no protection for homeowners from fraud and underpayment of claims for policyholders from our own Federal Government – which runs the NFIP).

Other ·       No provisions ·       No provisions ·       No provisions ·       Adds “wildfires on federal lands” in the definition of “major disasters” under the Stafford Act in the case of a presidential declaration of a major disaster.

(Why are homeowners/municipalities in “wildfire prone” areas not REQUIRED to purchase wildfire insurance?)

(Seems hypocritical for Crapo to want “welfare” for wildfires (100% disaster aid) but refuses to help NFIP, which defrays most of the cost of floods away from the Federal government)

Sponsors ·       Sen. Cochran (R- MS)

·       Sen. Kennedy (R-LA)

·       Sen. Rubio (R-FL)

·       Sen. Menendez (D-NJ)

·       Sen. Warren (D-MA)

·       Sen. Van Hollen (D-MD)

·       Sen. Booker (D-NJ)

·       H.R. 2868: Rep. Zeldin (R-NY)

·       H.R. 2874: Rep. Duffy (R-WI)

·       H.R. 1422: Reps. Ross (R-FL) and Castor (D-FL)

·       H.R. 1558: Reps. Royce (R-CA) and Blumenauer (D-OR)

·       H.R. 2246: Rep. Leutkmeyer (R-MO)

·       H.R. 2565: Rep. Leutkmeyer (R-MO)

·       H.R. 2875: Rep. Velazquez (D-NY)

·       Sen. Crapo (R-ID)

·       Sen. Brown (D-OH)

 

 

Download the full side by side comparison spreadsheet here  

 

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