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

Chapter: Appendix D: Homeowner Flood Insurance Affordability Act of 2014 - Section 16

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Suggested Citation:"Appendix D: Homeowner Flood Insurance Affordability Act of 2014 - Section 16." 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 D

Homeowner Flood Insurance Affordability Act of 2014—Section 16

SEC. 16. AFFORDABILITY STUDY AND REPORT

  1. STUDY ISSUES.—Subsection (a) of section 100236 of the Biggert-Waters Flood Insurance Reform Act of 2012 (Public Law 112–141; 126 Stat. 957) is amended—
  2. (1) in paragraph (3), by striking “and” at the end;

    (2) in paragraph (4), by striking the period at the end and inserting a semicolon; and

    (3) by adding at the end the following new paragraphs:

    “(5) options for maintaining affordability if annual premiums for flood insurance coverage were to increase to an amount greater than 2 percent of the liability coverage amount under the policy, including options for enhanced mitigation assistance and means-tested assistance;

    “(6) the effects that the establishment of catastrophe savings accounts would have regarding long-term affordability of flood insurance coverage; and

    “(7) options for modifying the surcharge under 1308A, including based on homeowner income, property value or risk of loss.”.

  3. TIMING OF SUBMISSION.—Notwithstanding the deadline under section 100236(c) of the Biggert-Waters Flood Insurance Reform Act of 2012
Suggested Citation:"Appendix D: Homeowner Flood Insurance Affordability Act of 2014 - Section 16." 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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  1. (Public Law 112–141; 126 Stat. 957), not later than 18 months after the date of enactment of this Act, the Administrator shall submit to the full Committee on Banking, Housing, and Urban Affairs and the full Committee on Appropriations of the Senate and the full Committee on Financial Services and the full Committee on Appropriations of the House of Representatives the affordability study and report required under such section 100236.

  2. AFFORDABILITY STUDY FUNDING.—Section 100236(d) of the Biggert-Waters Flood Insurance Reform Act of 2012 (Public Law 112–141; 126 Stat. 957) is amended by striking “$750,000” and inserting “$2,500,000”.
Suggested Citation:"Appendix D: Homeowner Flood Insurance Affordability Act of 2014 - Section 16." 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 111
Suggested Citation:"Appendix D: Homeowner Flood Insurance Affordability Act of 2014 - Section 16." 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 112
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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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