UPDATE: HR3370 Signed into law (summary)

Thank you to the NHMA Policy & Public Affairs committee for all of your hard work on this.  If anyone has thoughts to share about this current bill, please contact Lillian directly  at lillian.robison@aecom.com or by phone at (571) 438-2878 

 

Natural Hazard Mitigation Association – Analysis Worksheet

HR 3370 – Homeowner Flood Insurance Affordability Act

Summary Questions:

  • What is the Title or Name of the Legislation?
    • HR 3370 – Homeowner Flood Insurance Affordability Act (a.k.a. Grimm-Waters 2014)
    • Co-Sponsored by Rep. Michael Grimm (R-Staten Island NY)
    • Co-Sponsored by Rep. Maxine Waters (D-South Los Angeles CA)
    • Co-Sponsored by an additional 120 Representatives
  • What is the impetus for / origin of the Legislation?
    • Many legislators argued that the Biggert-Waters Flood Insurance Reform Act of 2012 (BW12) brought forward unbearable financial consequences for their constituents
  • When was the Policy Analysis delivered to the NHMA Policy & Public Affairs Committee?
    • March 10, 2014
  • What is included in the Legislation?
    • “An Act to delay the implementation of certain provisions of the Biggert-Waters Flood Insurance Reform Act of 2012, and for other purposes.”
    • Sec. 3: Repeal of certain rate increases
      • Clarifies that ‘deliberate choice of the policy holder’ should say “unless the decision of the policy holder to permit a lapse in flood insurance coverage was a result of the property covered by the policy no longer being required to retain such coverage”
      • Six to Eight month Timelines are established for FEMA to provide updated guidance and rate tables for use of the insurance industry
      • Excess premium charges will be refunded based upon these changes
    • Sec. 4: Restoration of grandfathered rates
      • The entire section that eliminated grandfathered rates in the BW12 Act is removed and have an effective date equivalent to BW12 (i.e. as if it never occurred)
    • Sec. 5: Requirements regarding annual rate increases
      • Sets a cap of 18% each year for annual rate increases, except for several specific circumstances
    • Sec. 6: Clarification of rates for properties newly mapped into areas with SFHAs
      • Properties located in an area not previously designated as SFHA in a newly mapped area will be rated as a Preferred Risk Policy for the first year and upon renewal will be calculated using an annual premium rate increase of 15% each year until the rate reaches the calculated rate
    • Sec. 7: Premiums and reports
      • Requires a report from FEMA to the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing and Urban Affairs of the Senate for all policies where the premiums exceed 1% of the total coverage provided by the policy
    • Sec. 8: Annual premium surcharge
      • Assignment of $25 (most cases) surcharge and $250 (non-residential and non-primary residence) surcharge to be deposited in a Reserve Fund.
    • Sec. 9: Draft affordability framework
      • Framework that proposes to address the issues of affordability must be completed and delivered to Congress within 18 months of the completion of the Affordability Study requested under BW12
      • Required Criteria: (1) Accurate communication to consumers of the flood risk associated with their properties, (2) Targeted assistance to policy holders based on their financial ability to continue to participate in the NFIP, (3) Individual or community actions to mitigate the risk of flooding, (4) Impact of increases in risk premium rates on participation in the NFIP, (5) Impact of map updates on the affordability of insurance.
    • Sec. 10: Risk transfer
      • Authority given to FEMA to secure reinsurance from private reinsurance and capital markets to obtain sufficient coverage reasonable and appropriate to pay claims
    • Sec. 11: Monthly installment payment for premiums
      • Establishes monthly payment schedule must be in place as an option, in addition to annual payment, within 18 months of the enactment of this Act.
    • Sec. 12: Optional high-deductible policies for residential properties
      • Provides for FEMA to conspicuously include the option of a high-deductible option of up to $10,000 in the coverage options available to policy holders.
    • Sec. 13: Exclusion of detached structures from mandatory purchase requirement
      • Clarifies that structures that are not attached to the ‘primary residential’ structure shall not require flood insurance coverage or be included in the rating for premiums.
      • Although the NFIP will no longer require coverage, mortgage lenders may still require coverage.
    • Sec. 14: Accounting for flood mitigation activities in estimates of premium rates
      • Rates will be calculated to reflect the flood mitigation activities that an owner or lessee has undertaken on a property, including differences in the risk involved due to land use measures, floodproofing, flood forecasting, and similar measures.
    • Sec. 15: Home improvement fairness
      • Changes from 30% to 50%
    • Sec. 16: Affordability study and report
      • Adds to the already requested Affordability Study: options for maintaining affordability if annual premiums were to reach an amount greater than 2% of the liability coverage, including options for enhanced mitigation assistance and means-tested assistance
      • Adds: the effects that the establishment of a catastrophe savings account would have regarding long-term affordability of flood insurance coverage
      • Extends the timeframe for the study to be completed to a date 18 months following the enactment of this Act
      • Increases funding for the Affordability Study from $750K to $2.5M
    • Sec. 17: Flood insurance rate map certification
      • Requirement for FEMA to implement a flood mapping program for the NFIP only after review by the TMAC that when applied results in technically credible flood hazard data in all areas where flood insurance rate maps are prepared or updated – – and shall certify in writing to the Congress when the program has been implemented
    • Sec. 18: Funds to reimburse homeowners for successful map appeals
      • When ‘successful’ appeals to FEMA’s maps are submitted and resolved, FEMA shall use funds from the National Flood Insurance Fund to reimburse homeowners for expenses.
    • Sec. 19: Flood protection systems
      • Clarifies in progress assessments of flood protection systems for the purposes of providing protection and adjusting associated premiums, i.e. if (1) 100% of the cost has been authorized, (2) at least 60% of the cost of the system has been appropriated, (3) at least 50% of the cost of the system has been expended, and (4) the system is at least 50% complete.
      • This applies to both riverine and coastal levees
    • Sec. 20: Quarterly reports regarding Reserve Fund ratio
      • These reports are now required to be submitted quarterly
    • Sec. 21: Treatment of floodproofed residential basements
      • FEMA is required to continue to extend exceptions and variance for flood-proofed basements consistent w/ 60.3 and 60.6 of 44 CFR
    • Sec. 22: Exemption from fees for certain map change requests
      • Elimination of fees for LOMCs in cases where the change is based on a habitat restoration project that is funded in whole or in part with Federal or State funds
      • This includes projects like dam removal, culvert redesign, culvert installation, or installation of fish passage
    • Sec. 23: Study of voluntary community-based flood insurance options
      • Provides 18 months for FEMA to report back to Congress on the best manner to incorporate voluntary community-based flood insurance policies and also a strategy to implement these policies in a way that would encourage mitigation activities
      • There is also a requirement for this study to be closely coordinated with the Comptroller General
    • Sec. 24: Designation of flood insurance advocate
      • FEMA shall designate a ‘Flood Insurance Advocate’ to advocate for the fair treatment of policy holders
      • Duties include A. educating policy holders, B. assisting policy holders to understand procedural requirements for (1) appealing the preliminary flood maps and (2) mitigating evolving risks, C. assist in developing regional capacity to respond to individual constituent concerns about flood hazard data, D. coordinate outreach and education with local officials and community leaders in areas impacted by map changes, and E. aid potential policy holders in obtaining accurate and reliable insurance rate information
    • Sec. 25: Exceptions to escrow requirement for flood insurance payments
      • Refinement to the escrow requirements for specific situations
    • Sec. 26: Flood mitigation methods for buildings
      • FEMA shall establish guidelines within one year of enactment of this Act for alternate mitigation methods, other than elevation, for buildings that can not be elevated due to their structural characteristics
      • FEMA shall inform property owners how the mitigation methods, if implemented, may affect premium rates
    • Sec. 27: Mapping of non-structural flood mitigation features
      • Efforts should occur for FEMA to work with states, local communities and property owners to identify areas protected by non-structure flood mitigation features
    • Sec. 28: Clear communications
      • FEMA shall clearly communicate full flood risk determinations to individual property owners regardless of whether their premium rates are full actuarial rates
    • Sec. 29: Protection of small businesses, non-profits, houses of worship, and residences
      • FEMA shall report to the Congress no later than 18 months after the enactment of this Act on the affordability of flood insurance for small businesses, non-profits, houses of worship and residences with a value of equal to or less than 25% of the median home value of properties in the State in which the property is located.
      • As soon as the determination is made that rate increases are resulting in lapsed policies, late payments, etc. for small businesses, non-profits, houses of worship, and/or residences with value equal to or less than 25% median home value, FEMA must make recommendations within 3 months to the Congress to improve affordability.
    • Sec. 30: Mapping
      • Adds the requirement for FEMA to notify the community, before any mapping or map updates begin, of the model or models that FEMA plans to use along with an explanation of why the model is appropriate
      • Provide 30 days to the community to coordinate with FEMA over this decision / selection of model(s) without waiving the right to appeal the subsequent study
      • Provide interim data to the community along with a 30 day comment period to allow for the community to provide supplemental or modified data that is consistent with prevailing engineering principles
      • Provide 30 days advance notice, in writing, to each Senator and the member of the House of Representatives for the affected community with estimated schedule for community meetings, publication dates of notices, beginning of the appeals process, and the estimated number of homes and businesses affected by the map changes
    • Sec. 31: Disclosure
      • Changes in rates resulting from this Act will be provided no later than 6 months following the date of enactment of this Act
      • Report on Policies and Claims data will be provided no later than 90 days following the date of enactment of this Act
  • What is the current status of the Legislation?
    • The Senate voted on and passed a related, but different bill (i.e. S. 1926) with a margin of 86 Yea / 13 Nay on January 27th
    • The House voted on and passed HR 3370 with 306 Yea / 94 Nay on March 4th
    • Read in the Senate on March 5th and placed on the Senate calendar on March 6th for this week (i.e. week of March 10th)