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As a follow on to last week’s ENN article about the agreement by the Senate to initiate debate to delay increases mandated by the Biggert-Waters
Flood Insurance Reform Act of 2012, the Senate recently passed (67-32) the
Menendez-Isakson Homeowner Flood Insurance Affordability Act which will delay
the Biggert-Waters Act until such time as FEMA can complete an affordability
study, provide solutions to mitigate their effect and scientifically certify
accuracy of the maps used to determine insurance rates on specific properties.
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According to FEMA, key provisions of the Biggert-Waters act
required “the NFIP (National Flood Insurance Program) to raise rates to reflect
true flood risk, make the program more financially stable, and change how Flood
Insurance Rate Map (FIRM) updates impact policyholders.” These rate increases
were to begin at the end of last year. The law was developed as a result of the
inundation of insurance claims posted after Hurricane Katrina, which put the
NFIP on the verge of bankruptcy. Further stress was added following Hurricane
Sandy.
The new law encourages Program financial
stability by eliminating some artificially low rates and discounts.
Implementation of the new flood insurance rates began in January of 2013. These
were for homes that are non-primary/secondary residences. But subsidized
policies for primary residential properties that have experienced severe or
repeated flooding were to see their rates increase 25% per year until their
rates reflected the true flood risk as were businesses and non-residential
properties on Special Flood Hazard areas beginning October 1 of 2013.
But the drastic increases are placing a tremendous burden on
recovering flood victims and on the real estate market as people can no longer
afford their homes and businesses. For those who built to code but had their
properties remapped into a higher risk area following construction and for
those who built before flood maps were ever released, property values are
likely to skyrocket.
The NFIP was originally created in 1968 by
Congress to help homeowners within flood zones to obtain affordable insurance
policies to rebuild following a devastating flood. According to FEMA, “The NFIP
was formed to fill that gap and was designed to incorporate community adoption
of minimum standards for new construction and development to minimize future
risk of flood damage. Pre-existing homes and businesses, however, could remain
as they were. Owners of many of these older properties were eligible to obtain
insurance at lower, subsidized rates that did not reflect the property’s true
flood risk.”
Read more at FEMA.
Flood
destroyed home, Hurricane Sandy via Shutterstock.
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