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FLOOD INSURANCE

(Current as of February 2003)

THE ISSUE IS: The adoption of legislation to reduce repetitive losses under the National Flood Insurance Program (NFIP).

IT'S IMPORTANT BECAUSE: Congress created the NFIP in 1968 to address the increasing costs of taxpayer funded disaster relief for flood victims and the increasing amount of damage caused by floods. The Federal Emergency Management Agency (FEMA) administers the NFIP. Home and business owners are able to purchase flood insurance if their properties are located in communities that adopt and enforce floodplain management ordinances to reduce future flood damage. One of the objectives of the NFIP is to make flood insurance affordable, so full actuarial rates are not charged. The high incidence of repetitive loss claims is a major problem that has developed under the NFIP. A National Wildlife Federation (NWF) analysis of the NFIP demonstrated that 40 percent of the program's payments go to repetitive loss properties, although they represent only two percent of all NFIP-insured properties. In addition, the NWF analysis found that almost 10 percent of repetitive loss homes have had cumulative NFIP claims that exceed the property's actual value.

Legislation to reduce repetitive loss claims was introduced early in the 108th Congress. On January 8, 2003,Representatives Doug Bereuter (R-Neb.) and Earl Blumenauer (D-Ore.) introduced H.R. 253, which would impose actuarial, risk-based rates for flood insurance on property owners who have had two or more NFIP claims paid out by FEMA and who have refused buyouts, elevation or other flood mitigation measures funded by FEMA. It would also make repetitive loss policyholders who have refused flood mitigation measures ineligible for Federal disaster relief assistance.

It is likely that Congress will adopt reforms to the NFIP in 2003. The program was set to expire on December 31, 2002, but Congress passed emergency legislation in the opening week of the 108th Congress to keep the program operating for one additional year. Congress is expected to include reforms in a longer-term reauthorization bill.

NAMIC POSITION: NAMIC supports efforts to reform the national flood program. NAMIC believes that it is reasonable to require homeowners who live in flood-prone areas to take advantage of mitigation measures offered by FEMA as a condition of receiving future disaster relief.

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