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Affordability of National Flood Insurance Program Premiums: Report 2 (2016)

Chapter: Appendix C: Biggert-Waters Flood Insurance Reform Act of 2012 - Section 100236

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Suggested Citation:"Appendix C: Biggert-Waters Flood Insurance Reform Act of 2012 - Section 100236." National Academies of Sciences, Engineering, and Medicine. 2016. Affordability of National Flood Insurance Program Premiums: Report 2. Washington, DC: The National Academies Press. doi: 10.17226/21848.
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Appendix C

Biggert-Waters Flood Insurance Reform Act of 2012—Section 100236

SEC. 100236. STUDY OF PARTICIPATION AND AFFORDABILITY FOR CERTAIN POLICYHOLDERS

  1. FEMA STUDY.—The Administrator shall conduct a study of—
    1. methods to encourage and maintain participation in the National Flood Insurance Program;
    2. methods to educate consumers about the National Flood Insurance Program and the flood risk associated with their property;
    3. methods for establishing an affordability framework for the National Flood Insurance Program, including methods to aid individuals to afford risk-based premiums under the National Flood Insurance Program through targeted assistance rather than generally subsidized rates, including means-tested vouchers; and
    4. the implications for the National Flood Insurance Program and the Federal budget of using each such method.
  2. NATIONAL ACADEMY OF SCIENCES ECONOMIC ANALYSIS.—To inform the Administrator in the conduct of the study under subsection (a), the Administrator shall enter into a contract under which the National Academy of Sciences, in consultation with the Comptroller General of the United States, shall conduct and submit to the Administrator an economic analysis of the costs and benefits to the Federal Government of a flood insurance program with full risk-based premiums, combined with means-tested Federal assistance to aid individuals who cannot afford coverage, through an insurance voucher program. The analysis shall compare the
Suggested Citation:"Appendix C: Biggert-Waters Flood Insurance Reform Act of 2012 - Section 100236." National Academies of Sciences, Engineering, and Medicine. 2016. Affordability of National Flood Insurance Program Premiums: Report 2. Washington, DC: The National Academies Press. doi: 10.17226/21848.
×
  1. costs of a program of risk-based rates and means-tested assistance to the current system of subsidized flood insurance rates and federally funded disaster relief for people without coverage.

  2. REPORT.—Not later than 270 days after the date of enactment of this Act, the Administrator shall submit to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives a report that contains the results of the study and analysis under this section.
  3. FUNDING.—Notwithstanding section 1310 of the National Flood Insurance Act of 1968 (42 U.S.C. 4017), there shall be available to the Administrator from the National Flood Insurance Fund of amounts not otherwise obligated, not more than $750,000 to carry out this section.
Suggested Citation:"Appendix C: Biggert-Waters Flood Insurance Reform Act of 2012 - Section 100236." National Academies of Sciences, Engineering, and Medicine. 2016. Affordability of National Flood Insurance Program Premiums: Report 2. Washington, DC: The National Academies Press. doi: 10.17226/21848.
×
Page 109
Suggested Citation:"Appendix C: Biggert-Waters Flood Insurance Reform Act of 2012 - Section 100236." National Academies of Sciences, Engineering, and Medicine. 2016. Affordability of National Flood Insurance Program Premiums: Report 2. Washington, DC: The National Academies Press. doi: 10.17226/21848.
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Page 110
Next: Appendix D: Homeowner Flood Insurance Affordability Act of 2014 - Section 16 »
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When Congress authorized the National Flood Insurance Program (NFIP) in 1968, it intended for the program to encourage community initiatives in flood risk management, charge insurance premiums consistent with actuarial pricing principles, and encourage the purchase of flood insurance by owners of flood prone properties, in part, by offering affordable premiums. The NFIP has been reauthorized many times since 1968, most recently with the Biggert-Waters Flood Insurance Reform Act of 2012 (BW 2012). In this most recent reauthorization, Congress placed a particular emphasis on setting flood insurance premiums following actuarial pricing principles, which was motivated by a desire to ensure future revenues were adequate to pay claims and administrative expenses. BW 2012 was designed to move the NFIP towards risk-based premiums for all flood insurance policies. The result was to be increased premiums for some policyholders that had been paying less than NFIP risk-based premiums and to possibly increase premiums for all policyholders.

Recognition of this possibility and concern for the affordability of flood insurance is reflected in sections of the Homeowner Flood Insurance Affordability Act of 2014 (HFIAA 2014). These sections called on FEMA to propose a draft affordability framework for the NFIP after completing an analysis of the efforts of possible programs for offering “means-tested assistance” to policyholders for whom higher rates may not be affordable.

BW 2012 and HFIAA 2014 mandated that FEMA conduct a study, in cooperation with the National Academies of Sciences, Engineering, and Medicine, which would compare the costs of a program of risk-based rates and means-tested assistance to the current system of subsidized flood insurance rates and federally funded disaster relief for people without coverage. Production of two reports was agreed upon to fulfill this mandate. This second report proposes alternative approaches for a national evaluation of affordability program policy options and includes lessons for the design of a national study from a proof-of-concept pilot study.

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