Paving the way for a five-year plan that overhauls the bankrupt federal program, which is due to expire September 30, a House subcommittee on Wednesday approved a long-awaited reauthorization of the troubled National Flood Insurance Program (NFIP).
"In the near term, the reforms included in H.R. 1309 will improve NFIP's financial stability, reduce the burden on taxpayers and examine ways to increase private market participation," said Rep. Judy Biggert, R-Ill., the chairwoman of the House Financial Services Committee's Subcommittee on Insurance, Housing and Community Opportunity.
The legislation, which passed by voice vote, had strong bipartisan support and will revamp the program, which is nearly $18 billion in debt since Hurricane Katrina in 2005. It would increase premiums, create new flood maps and give the Federal Emergency Management Agency more flexibility. FEMA administers the flood insurance program.
The bill also has wide support in the full House; its chances in the Senate are uncertain.
Biggert said the bill would phase in actuarially sound rates for policyholders, which would shore up the program and allow it to pay down its taxpayer-funded debt. She said lawmakers' goal was to look for "a long-term plan for flood insurance that eliminates taxpayer risk." Under the bill, FEMA would solicit bids from insurers on flood insurance costs and report to Congress within 18 months.
The bill re-establishes the Technical Mapping Advisory Council, which operated from 1995 to 2000, to help draw maps reflecting flood hazard risk; allows FEMA to suspend mandatory flood-insurance requirements in new flood-risk zones for one year; and authorizes FEMA to offer new coverage for additional living expenses associated with the loss of use of a residential property, up to a maximum of $5,000, and coverage for the interruption of business operations, up to a maximum of $20,000.
On premiums, the legislation raises the annual limit on increases from 10 percent to 20 percent and authorizes FEMA one year after enactment to eliminate discounted rates.
The bill sets minimum deductibles of $1,000 for properties with full-risk rates, and $2,000 for properties with discounted rates. Beginning in 2012, maximum coverage limits — currently $250,000 for residential structures, $100,000 for residential contents and $500,000 for commercial properties, including structures and contents — would be indexed to inflation.