Van Hollen, Menendez, Cassidy Introduce Bicameral, Biparty Bill to Reform National Flood Insurance Program

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November 02, 2021

Legislation would reform the NFIP, ensure affordability and sustainability, and invest in mitigation and prevention

Today, US Senators Chris Van Hollen (D-Md.), Bob Menendez (DN.J.) and Bill Cassidy (R-La.) Presented bipartite and bicameral legislation to extend the National Flood Insurance Program (NFIP) for five years, while implementing a series of sweeping reforms to tackle the waste, abuse and mismanagement plaguing the system. More than five million Americans depend on NFIP. Congressman Frank Pallone, Jr. (DN.J.) sponsored the bill in the House of Representatives.

The National Flood Insurance Program Reauthorization and Reform Act tackles systemic flood insurance issues, puts it back on a sound fiscal footing, and reframes the country’s entire disaster paradigm. into a paradigm that focuses more on prevention and mitigation in order to save the high cost of reconstruction after catastrophic floods.

Risk Rating 2.0, the Federal Emergency Management Agency’s (FEMA) new rating system, went into effect earlier this month, which is expected to increase premiums by 80% of NFIP policyholders nationwide. About 900,000 policyholders are expected to abandon their insurance because of the increases.

Senators John Kennedy (R-La.), Cory Booker (DN.J.), Cindy Hyde-Smith (R-Miss.), Marco Rubio (R-Fla.), Roger Wicker (R-Miss.) And Kirsten Gillibrand (DN.Y.).

The law on the re-authorization and reform of the national flood insurance program provides:

  • Long-term certainty. Re-authorize NFIP for five years, providing certainty to communities.
  • No sharp rise in rates under the 2.0 risk rating. Protects policyholders against exorbitant premium increases by capping annual increases at 9%. Currently, premiums can almost double every 4 years and FEMA’s new methodology called Risk Rating 2.0 will fundamentally change the premiums for every policy in the country. This new methodology is expected to cause a rate shock and lead to unaffordable premiums, forcing homeowners to abandon their coverage or lose their home. CBO and FEMA believe the 2.0 risk rating will cause nearly 900,000 policyholders to drop NFIP coverage due to rapidly rising premiums. We have seen all too clearly the negative consequences of rising premiums after the Biggert-Waters Act of 2012 skyrocketed costs, hurting policyholders and disrupting the real estate market. This will put safeguards on FEMA’s new rating methodology, known as Risk Rating 2.0, and protect policyholders from sudden rate shocks while responsibly disclosing all of the flood risk.
  • Affordability for low and middle income policyholders. Provides a comprehensive means-tested voucher for millions of low and middle income homeowners and renters if their flood insurance premium becomes too high, dramatically increasing the affordability of the NFIP program.
  • Path to NFIP solvency. Freezes interest payments on NFIP debt and reinvests savings in cost mitigation efforts to restore program solvency and reduce future borrowing
  • Limits on the profits of private insurance companies. Write Your Own Caps (WYO) compensation at the rate FEMA pays to manage its own policies and redirects savings to pay for the means-tested affordability program.
  • Increased coverage of compliance costs (CCI). Increases the maximum limit of ICC coverage to better reflect the costs of reconstruction and implementation of mitigation projects. In addition, eligibility for ICC coverage is broadened to encourage more proactive mitigation before natural disasters occur.
  • Strong investments in mitigation. Provides strong funding levels for profitable investments in mitigation, which have a significant return on investment and are the most effective way to reduce flood risk.
  • More precise mapping. Increases funding for FEMA’s Flood Mapping Program to implement Light Sensing and Telemetry (LiDAR) technology for more accurate flood risk across the country, generating data that will enable better use buildings and soils.
  • Supervision of Write Your Own (WYO) companies. Creates new oversight measures for insurance companies and suppliers, and gives FEMA greater authority to terminate contractors who have a history of abuse.
  • Complaints and appeals process reforms based on lessons from Sandy. Fundamentally reform the claims process based on lessons learned from Storm Sandy and other disasters to level the playing field for policyholders during appeals or litigation, prohibit aggressive legal tactics preventing homeowners from filing legitimate claims, keeps FEMA within strict deadlines so that homeowners get prompt and fair payments, and ends FEMA’s reliance on external legal counsel from costly for-profit entities.

A copy of the invoice text can be found here. A copy of the bill clause by clause can be found here.



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