House Passes Flood Insurance Reform Legislation

The House of Representatives passed H.R. 3959, sponsored by Financial Services Committee Chairman, Barney Frank (D-Mass.), and Rep. Scott Garrett (R-N.J.), legislation that would gradually phase-out some of the subsidies in the National Flood Insurance Program (NFIP).

The bill would require buyers of pre-FIRM primary residential homes that cost $600,000 or more to pay phased-in actuarial flood insurance prices using the same phase-in structure that non-residential and non-primary homes are currently subject to. Pre-FIRM homes, or those subject to the Flood Insurance Reform and Modernization (FIRM) Act, include homes homes built before flood insurance rate maps went into effect in 1974. The legislation would help phase out any subsidies for such homes valued at $600,000 or more.

The phase-out of subsidies for pre-FIRM properties is one of the 23 recommendations for reforming the NFIP for the future supported by the Independent Insurance Agents and Brokers of America.

“The Big ‘I’ strongly supports the NFIP gradually moving towards actuarially sound rates,” says John Prible, Big “I” assistant vice president for federal government affairs. “We recognize that the NFIP’s need for financial stability must be measured against fairness to the customers we serve, which is why we believe it is important that this legislation is aimed at homes valued at over $600,000 and includes a phase-in mechanism.”

“The Big ‘I’ thanks Congressman Garrett, Chairman Frank, and Ranking Member Bachus for advancing this legislation through the House,” says Charles E. Symington Jr., Big “I” senior vice president for Government Affairs. “This would make the flood program more actuarially sound and more effective at serving both consumers and taxpayers, and we hope the Senate will consider including it in their broader Flood Insurance Reform and Modernization legislation.”

The Property Casualty Insurers Association of America also praised the legislation, calling it “a positive step toward shoring up the National Flood Insurance Program (NFIP) without creating unanticipated premium increases.”

“This bill is a great start to the 2008 flood insurance reform efforts and illustrates Congressional commitment to strengthen the NFIP for policyholders and taxpayers across America,” said Paul Kangas, PCI’s director, federal government relations. “PCI has long supported reforms that would shore up the National Flood Insurance Program’s solvency, and we believe that H.R. 3959 will help get us closer to that goal. We commend Congressman Garrett and Chairman Frank for introducing this legislation, and we strongly support it as it moves to the Senate for consideration.”

Source: PCI, IIABA