Bills
| 3.23.22

Should the National Flood Insurance Program be Reauthorized and Reformed? (H.R. 2874)

Do you support or oppose this bill?

What is H.R. 2874?

(Updated October 5, 2018)

This bill would authorize the National Flood Insurance Program (NFIP), which is administered by the Federal Emergency Management Agency (FEMA), to enter into and renew flood insurance policies through fiscal year 2022 — authority that’s set to expire after December 8, 2017. It would also change annual limits on premium increases for NFIP insurance, and require FEMA to provide financial assistance through state programs for low-income families to buy NFIP insurance.

FEMA would be required to provide policyholders with:

  • An annual explanation of premiums;

  • Historical flood data to property owners upon request;

  • Data related to NFIP risks and premiums, including community-level data, through a publicly available data system.

FEMA would be required to commission an annual independent actuarial review of the financial status of NFIP. The Government Accountability Office would have to report on:

  • The feasibility of reducing flood insurance premiums and eliminating the need for flood insurance coverage by authorizing flood damage savings accounts;

  • Flood insurance requirements for mortgages.

Penalties for violations of the flood insurance requirement for mortgages would be increased.

The NFIP’s community rating program would be revised to require FEMA to provide premium credits in communities that protect natural and beneficial floodplain functions. NFIP coverage would be revised for:

  • Properties that have incurred multiple flood losses;

  • Properties that have exceeded specified levels of claim payments;

  • Certain high-risk properties.

FEMA would be required to allow a Write Your Own Company — which writes and services federal standard flood insurance policies in its own name — to sell private flood insurance.

Argument in favor

The National Flood Insurance Program needs to be reauthorized so that it can continue to help American families harmed by floods along with reforms to stabilize the program by ensuring that homeowners pay premiums that fairly reflect their risk.

Argument opposed

This bill would make flood insurance less affordable by raising premiums, fees, and surcharges on policyholders. The private flood insurance market should be developed more slowly than this bill would allow for.

Impact

Homeowners with flood insurance policies; insurance companies; the NFIP; and FEMA.

Cost of H.R. 2874

The CBO estimates that enacting this bill would reduce spending by $187 million over the 2018-2027 period and increase revenues by about $4 million over the same period.

Additional Info

In-Depth: Sponsoring Rep. Sean Duffy (R-WI) introduced this bill to reauthorize and reform the NFIP, which owes $25 billion to the U.S. Treasury, and end what he views as an unfair system of subsidies. Duffy argues that the practice of subsidizing premiums for those who live near coasts and waterways is unfair to households outside of floodplains who fund the subsidies through their tax dollars.

Duffy said that subsidies are going to “wealthy homeowners on the coast” and that his bill would “gently move these people to the point they are paying premiums commensurate with the risk.”

House Democrats have expressed their opposition to this bill on the grounds that it would “make flood insurance less affordable, less available, and less fair for consumers” and added in the bill’s report:

“H.R. 2874 would make flood insurance less affordable by raising premiums, fees, and surcharges on policyholders, while doing nothing to address the NFIP’s debt or the billions of dollars being spent on interest to service that debt.”

This legislation passed the House Financial Services Committee on a 30-26 vote.


Media:

Summary by Eric Revell

(Photo Credit: EEL_Tony / iStock)