On January 30, the United States Senate passed S.1926 to delay the implementation of certain provisions of the Biggert-Waters Flood Insurance Reform Act (BW-12). BW-12 is designed to eliminate government flood insurance subsidies and stabilize the National Flood Insurance Program (NFIP) by raising rates by 20-25 percent annually to reflect true flood risk. The NFIP currently faces a $24 billion shortfall, which Congress sought to address by enacting BW-12. As an unintended consequence, however, Florida’s property owners are experiencing – or will be subject to – dramatic and unaffordable increases in insurance premiums, which are already stalling the state’s real estate market.
S.1926 was supported by Florida’s Senators Bill Nelson and Marco Rubio and passed by a majority vote of 67-32 (Read FAC’s Statement on the Passage of S.1926). The bill provides a four-year delay in premium increases for all “grandfathered” or post-FIRM properties (properties built to code after the adoption of FEMA maps in their communities) including primary residences, businesses, and second homes. It also eliminates the provision in BW-12 that requires any “subsidized policy” move to the full risk rate when the property is sold. Pre-FIRM second homes and businesses will continue to see premiums rise 25 percent a year off the current premium until the full risk rate is achieved, but the property sales trigger that requires new purchasers to assume the full premium immediately is removed. In addition, Senator Rubio successfully amended S. 1926 to require FEMA to make publicly available data that provide the basis for risk premium rates for flood insurance; allow monthly installment payments for premiums; and ensure that mitigation activities completed by policy holders are accounted for when FEMA determines risk premium rates.
The bill with the most support for delaying provisions of BW-12 in the U.S. House of Representatives is the Homeowner Flood Insurance Affordability Act of 2013 (H.R.3370). H.R.3370 has 191 cosponsors, including Florida Representatives Brown, Buchanan, Castor, Deutch, Diaz-Balart, Frankel, Garcia, Murphy, Nugent, Ros-Lehtinen, Wasserman-Schultz, Wilson, Bilirakis, Hastings, Rooney, Miller, Southerland and Grayson. There is no schedule to bring this bill to the House Financial Services Committee, which has jurisdiction over insurance. FAC is traveling to Washington, DC on February 11 & 12 with a delegation of county commissioners and staff to meet with members of the U.S House along with FEMA and the White House Office of Intergovernmental Affairs.
To read more about flood insurance reform and FAC’s advocacy, visit http://www.fl-counties.com/advocacy/federal.------
STATEMENT BY THE FLORIDA ASSOCIATION OF COUNTIES EXECUTIVE DIRECTOR CHRIS HOLLEY REGARDING THE PASSAGE OF S.1926 TO DELAY FLOOD INSURANCE HIKES
"The Florida Association of Counties would like to thank Florida Senators Bill Nelson and Marco Rubio for their leadership today in passing S.1926. Delaying implementation of portions of the Biggert-Waters Flood Insurance Reform Act of 2012 (BW-12) will bring much needed relief to Florida's property owners.
"Senators Nelson and Rubio recognized the unaffordable burden BW-12 placed on the more than 2 million National Flood Insurance Program (NFIP) policy holders in Florida and acted swiftly to mitigate the consequences while allowing time to develop a more equitable and feasible solution to the NFIP budgetary shortfall. We encourage the U. S. House of Representatives to quickly follow suit by taking up and acting on this important issue.
"The Association appreciates the support of Florida's Congressional Delegation and looks forward to working with them on long-term solutions that can bring solvency to the NFIP without unduly burdening homeowners, businesses and taxpayers."
Press Release on FAC's Roadmap to Affordable Flood Insurance
FOR IMMEDIATE RELEASE
January 31, 2014
Florida Association of Counties Releases Roadmap to Affordable Flood Insurance
Proposal Calls for Affordability and Mitigation Measures along with Delay in Rate Hikes
TALLAHASSEE, FL - Today, the Florida Association of Counties (FAC) released a package of reform proposals to address massive flood insurance rate hikes hitting Floridians since the passage of the Biggert-Waters Flood Insurance Reform Act (BW-12) by the United States Congress. Along with a more deliberative approach to changes in flood insurance premiums, FAC is encouraging Congress to adopt flood mitigation and affordability solutions that set the National Flood Insurance Program (NFIP) on a pathway to solvency without stifling a recovering economy and unnecessarily burdening homeowners and businesses.
Passed in 2012, BW-12 is designed to eliminate government flood insurance subsidies and stabilize the NFIP by raising rates by 20-25 percent annually to reflect true flood risk. As a consequence of the Act, property owners across the nation are experiencing - or will be subject to - dramatic and unaffordable increases in insurance premiums. Close to 270,000 policyholders in Florida's communities are subject to the impacts of premium changes already in effect.
Since sky-rocketing premiums began to impact communities, efforts in Congress have focused on delaying rate increases for certain, but not all, property owners, which leaves many policyholders in Florida vulnerable to immediate and dramatic premium hikes. Together with a limited delay, FAC is encouraging Congress to adopt flood mitigation and affordability solutions. Proposals in the Roadmap to Affordable Flood Insurance include:
- Delay Rate Increase – Complete Affordability Study
Delay rate increases until the Federal Emergency Management (FEMA) completes its affordability study, which is required by BW-12.
- Reduce Rate Increases – Implement a Means-Tested Assistance Program
Limit rate increases to no more than 10 percent per year; implement a means-tested assistance program for property owners who cannot afford coverage.
- Treat Pre-Firm (Section 205) Properties Equally – Eliminate Rate Triggers
Treat all Section 205 properties (a.k.a. pre-FIRM structures) alike (i.e. primary, secondary, businesses); eliminate the full rate trigger for policy lapses and properties that are sold; tie the rate to the property and not the property owner.
- Improve Consumer Protection
Authorize an independent agency to review and approve rate increases before Write Your Own (WYO) companies, and FEMA, issue new policies. Require WYO companies to provide policy holders a complete analysis that supports the premiums set forth in a policy renewal. Designate a Flood Insurance Consumer Advocate to represent the interests of policyholders when insurance decisions are made. Create an appeals process that allows property owners, through the Flood Insurance Consumer Advocate, to appeal rate hikes that exceed a certain dollar threshold.
- Improve Accountability for NFIP Operating Expenses
Ensure FEMA’s rulemaking on reimbursement of expenses under the Write Your Own (WYO) program is completed, as scheduled, and that reimbursements to WYO companies track the actual business and operating expenses of those companies.
- Expand Flood Mitigation
Aggressively expand flood mitigation efforts to (1) increase federal funding for flood mitigation, (2) streamline grant administration, (3) implement alternative voucher systems that would allow property owners to undertake mitigation efforts that lower their risk and, subsequently, their insurance rates, and (4) provide tax credits to policy holders who undertake mitigation with their own funds.
“While a good start, a delay in rate hikes for certain property owners is not a cure-all, particularly for Floridians,” said FAC Federal Committee Chair and Martin County Commissioner Doug Smith. “Florida is recovering from the worst economic recession in recent history and Floridians are ill equipped to bear the consequences created by BW-12. Our Roadmap provides solutions that address the debt incurred by the NFIP without unnecessarily burdening our homeowners.”
The U.S. Senate this week took up and passed S.1926, which would delay for up to four years certain provisions of BW-12. FAC is traveling to Washington, DC with county commissioners on February 11 and 12 to urge the U.S. House of Representatives to address unaffordable premium hikes and to support affordability and mitigation measures.
“Florida's Congressional Delegation deserves our thanks for their efforts to provide property owners with relief from unaffordable flood insurance. We recognize that more work needs to be done,” said FAC President and Leon County Commissioner Bryan Desloge. “Congress can help harden communities to the impact of flooding and help homeowners and businesses keep their properties. We encourage the House of Representatives to follow the Senate’s lead and act quickly to address the affordability of flood insurance.”
With more than 2 million policyholders, Florida makes up 37 percent of those who participate in the NFIP. Florida's policyholders have paid in more than $16 billion* into the program since 1978, with claims totaling only $3.7 billion during the same timeframe. Thirteen percent of policies owned by Floridians are subsidized. The NFIP currently faces a $24 billion shortfall, which Congress sought to address by enacting BW-12.
Founded in 1929, the Florida Association of Counties is a non-profit association representing the diverse interests of Florida’s 67 counties. The Florida Association of Counties helps counties effectively serve and represent Floridians by strengthening and preserving county home rule through advocacy, education and collaboration.
To read FAC’s Roadmap to Affordable Flood Insurance and for FAC’s statement on the U.S. Senate’s passage of S.1926, visit a http://www.fl-counties.com/advocacy/federal.
*Wharton Center for Risk Management, University of Pennsylvania