Congress Passes Authorization for National Flood Insurance Program - 6/28/2004 - Insurance Lawyers Taxes

Congress Passes Long-Term Authorization for National Flood Insurance Program

The legislation addresses the most important aspects of NAHB’s flood insurance policy: long-term, four-year reauthorization of the national flood insurance program and full eligibility for property owners and “severe repetitive loss properties.”

Earlier this year, lawmakers extended the Federal Emergency Management Agency's (FEMA) statutory authority to issue flood insurance polices until the end of this month. The four-year reauthorization plan approved by the Congress will ensure the long-term viability of the program.

In addition to reauthorizing the NFIP, the bill establishes a $40 million pilot program to reduce repeated payments to owners of a few relatively flood-prone areas that are considered "severe repetitive loss properties." Under the pilot program, owners of severe repetitive loss properties who refuse mitigation assistance and who suffer additional, costly flood damages would face an increase in their premium after each flood-insurance claim. However, the premium can never exceed market rates for flood insurance.

NAHB successfully lobbied lawmakers to ensure that all properties located within a FEMA-designated flood plain, including severe repetitive loss properties, remain eligible for flood insurance.

While the legislation addresses all of NAHB’s objectives, the association was seeking additional guarantees that redevelopment could occur on FEMA-purchased properties, but the authors of the bill did not want to encourage redevelopment in flood-prone areas. However, NAHB was able to ensure that under the severe repetitive loss pilot program, flood damaged structures can be demolished and rebuilt in an effort to prevent future flood damage.

Specifically, the legislation:

• Defines “severe retentive loss property” so that the most serious flood risks are included in the pilot program
• Stipulates that no property owner may be removed from the national flood insurance program because of additional claims on a severe repetitive loss property
• Requires FEMA to notify landowners when their property is deemed “severe repetitive loss” under the pilot program, to inform property owners of the types of assistance that they are eligible for under the pilot program and to explain the implications for refusing an offer of mitigation assistance
• Allows for the demolition and reconstruction of a structure as an option for mitigation assistance
• Permits property owners to appeal a mitigation offer in an effort to find a more cost-effective method for mitigating flood prone property
• Preserves, in statute, state and local ability to opt in or out of the pilot program
• Requires FEMA to follow local decisions on the types of mitigation offers that will be made to property owners.

To view the bill, click here and type S. 2238 in the upper left hand corner. For more information, e-mail Jim Tobin or call him at 800-368-5242 x8470.