The bill amends a few provisions of the 2012 Biggert-Waters
Flood Insurance Reforms Act, which caused premiums to go up in certain areas of
America.
The bill also reinstates government subsidies for
properties that were purchased and sold before the Flood Insurance Rate Maps
(FIRM) were available.
The Menendez-Grimm bill will now go to President
Obama. The White House, however, has expressed concerns about rolling back some
of the flood insurance reforms proposed by Biggert-Waters.
While the new bill had the backing of realtors,
builders, lenders, and homeowners; some taxpayer and environmental groups were
against it. In addition, the new bill will prevent the entry of private
insurers into the flood insurance market. Private insurance companies have been
demanding the abolition of subsidized rates for a while.
The National Association of Mutual Insurance
Companies (NAMIC) said that it was disappointed by the bill. Independent
agents, on the other hand, supported the bill. Rate hikes will make flood
insurance unaffordable. It may also cause a drop in home values.
Here is a summary of the bill.
The bill prevents premiums from going through the
roof. There is a ceiling on annual rate hikes. The bill prevents FEMA from increasing
the average premiums for a particular kind of properties beyond 15 percent. The
premiums on individual policies cannot be increased by more than 18% per year.
The bill repealed Biggert-Waters provision which
required property buyers to pay full-risk premiums for properties bought and
sold before flood maps were available. This provision had caused property
prices to drop and affected the realty sector.
Grandfathering
The bill reinstates grandfathering. If this was
abolished, property owners in high risk areas would either have to elevate
their home or pay higher premiums. The new bill also asks FEMA to refund
insurance policyholders who overpaid their premiums.
Affordability
The bill requires FEMA to limit the number of flood
insurance policies whose annual premiums exceed 1% of the total flood coverage
offered by the policy.
Extra
features
The bill gives FEMA the right to use the National
Flood Insurance Funds to reimburse policyholders who appeal a map finding
successfully.
The bill also provides for the establishment of a
Flood Insurance Advocate. The Flood Insurance Advocate will answer
policyholders' questions about flood mapping processes and flood insurance
premiums.
Urban
mitigation fairness
This provision requires FEMA to suggest guidelines
on alternative methods to mitigate risks where traditional methods are not
practical.
Clear
communication
FEMA has to communicate full flood risks to
policyholders regardless of whether they pay full-risk premiums or not. This
helps them assess their full flood risk.
FEMA has to report to US Congress what impact rate
hikes will have on small businesses, places of worship and non-profits whose
values are less than 25 percent of area median property value.
Mapping
accuracy
FEMA has to certify that its mapping processes are
technologically sophisticated. It also has to prove that the mapping models it
uses to create the flood map of an area are appropriate. FEMA has to make the
underwriting guidelines and rate tables publicly available.
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