With the National Flood Insurance Program (NFIP) drowning in almost 25 billion in debt, congress passed the Biggert-Waters Flood Insurance Reform Act in 2012 to help in reducing the balance. The act calls for the elimination of premium subsidies for repetitive loss properties, property owners who do not take steps to mitigate, secondary homes and certain properties that have been protected from risk-based rates by grandfathering of premium subsidies for property owners as well as remapping of communities. This has created big premium hikes for current policyholders and resulted in more property owners being told they must have flood coverage. Needless to say, many are unhappy with the act and demanded lawmakers to make changes. Several Gulf Coast states even threatened to sue the federal government to block or delay the act.
After much discussion among key House and Senate members, a bipartisan deal to delay changes to the federal flood insurance program was reached late last month.
However, the prospect of a delay in flood insurance reforms is being met with push back from business, taxpayer and insurance groups. They argue that the NFIP essentially uses tax dollars to incentivize high risk behavior that increases federal disaster costs. They agree the solution is moving towards risk-based pricing for flood coverages, with the hope the program will one day be self sufficient.
The new legislation calls for a four-year delay in most rate increases and requires FEMA to complete an affordability study and propose regulations that address affordability issues. Welcome news for the estimated 1.6 million flood policyholders that currently receive subsides.