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What You Need To Know About Flood Insurance

By Anthony SanFilippo
August 2017


Here is all you need to know about the National Flood Insurance Program (NFIP), and the proposed legislation to reauthorize the program once it expires at the end of the year.

  • Every five years, Congress must reauthorize the NFIP to continue selling flood insurance; the next deadline for Congress to act is September 30, of this year, or the program shuts down.
  • The NFIP was created in 1968 following Hurricane Betsy, which became known as “Billion Dollar Betsy” because it was the first storm to cost more than $1 billion in damage.
  • The NFIP chugged along smoothly for nearly 40 years before it started to get into debt when flooding incidents increased and costs began to rise beyond the point of funds available in the program.
  • In 2008, the NFIP was $18 billion in debt and Congress debated how to reform the NFIP without consensus. There were a series of 18 short-term extensions and four program lapses between 2008 and 2012.
  • In 2012, Congress came to an agreement known as the Biggert-Waters Reform Act. It reauthorized the NFIP for five more years and addressed the program’s fiscal solvency.
  • However, a bunch of unintended consequences arose from Biggert-Waters. Subsidies were eliminated when properties built before the creation of flood maps were purchased. Homebuyers were quoted a grandfathered rate and then two weeks before closing were told that would increase by five times the price, and had to walk away.
  • In 2014, the Grimm-Waters Act, also known as the Homeowner Affordability Insurance Relief Act, was passed. It restored grandfathering, capped rate increases and eliminated the point of sale increases.
  • Now, in 2017, the NFIP is $25 billion in debt and repeatedly flooding properties account for 1 percent of NFIP policies but 30% of all claims.
  • The House Financial Services Committee passed seven bills addressing the NFIP in June addressing things such as private flood insurance, changes to the claims process and new flood mapping procedures.
  • House leadership has not scheduled a vote but is expected to combine all seven bills into one bill, with modifications, before the full House of Representations can consider the omnibus measure.

Here is what you need to know about the current legislation.

The National Association of REALTORS® (NAR) supports the legislation, including:

  1. A new five-year reauthorization through 2022.
  2. The Ross-Castor Private Flood Bill that allows for a growing private flood insurance market and provides individual property owners with the same amount of coverage at the least amount of cost.
  3. Strengthens the NFIP solvency.
  4. Allows for $1 billion in property mitigation grants that will help lessen the sting of rate increases for property owners.
  5. Doubles the increased cost of compliance and allows for pre-flood insurance rates.
  6. Improves the rate fairness of the NFIP.
  7. Caps NFIP rates for the first time ever at $10,000
  8. Streamlines the community map appeals process.

*Note: Some Information from Realtor.com was used in this report.



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