Bill in Congress Would Block Important Flood Insurance Reforms

Published June 4, 2013

New legislation introduced by Sen. Mary Landrieu (D-LA) would indefinitely delay vital reforms to the deeply insolvent National Flood Insurance Program that were passed by Congress overwhelmingly just a year ago, according to the R Street Institute.

Landrieu’s “Strengthen, Modernize and Reform The National Flood Insurance Program Act” proposes to delay or undo several reforms in the Biggert-Waters Flood Insurance Reform Act, which passed Congress in June 2012. Landrieu and every other member of the Louisiana delegation voted for the authorizing legislation.

Phased-In Rates

Under Biggert-Waters, inadequate “grandfathered” flood insurance rates for second homes, business properties, and properties that have been subject to severe repetitive losses are subject to rise until they reflect the true risks the properties face, with the increases phased in over a four-year period.

The law also requires that when changes to flood maps prepared by the Federal Emergency Management Agency show a property faces heightened flood risks or is newly included in a Special Flood Hazard Area, risk-based rates are phased in over a five-year period.

“Flood insurance must be affordable, accessible and self-sustainable. Biggert-Waters only addressed self-sustainability at the cost of homeowners in Louisiana and across the country living around water,” Landrieu said in a statement. “The SMART NFIP Act is a better way to achieve all three of these goals and will allow families and businesses to continue working and living securely around water.”

Phase-In Delay

Landrieu’s bill would delay the start of the phase-in of risk-based rates for five years. It would also undo a provision of the law requiring that grandfathered rate subsidies end when a home is resold. To pay for the extended rate subsidies, Landrieu’s legislation would require that rates rise for the 80 percent of NFIP properties that do not receive subsidies.

“Passage of Biggert-Waters was a landmark statement by Congress that it was serious about addressing the inherent flaws of a program that puts people in harm’s way, encourages environmental degradation and wetlands depletion, and is nearly $30 billion in debt,” said R Street Senior Fellow R. J. Lehmann. “Congress took a measured approach to reform by phasing out the most indefensible subsidies and ensuring that any rate increases were modest and gradual.

“Sen. Landrieu’s bill would undo all of the hard work and delicate compromises that went into a decade’s worth of consensus building in Congress,” Lehmann continued. “More importantly, it represents a return to many of the bad policies that got the NFIP into the mess it currently faces.”

Source: R Street Institute