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Waters-McHenry may result in PIA-supported NFIP reauthorization

This week, the U.S. House Financial Services Committee passed the Waters-McHenry National Flood Insurance Program Reauthorization bill (H.R.3167), a necessary step if Congress wants to reform the NFIP and reauthorize the program for multiple years. Named for the Committee Chair Maxine Waters, D-Calif., and Ranking Member Patrick McHenry, R-N.C., the Waters-McHenry bill would reauthorize the NFIP for five years, includes continuous coverage provisions, and contains no cuts to Write-Your-Own rates. These are among the top priorities for PIA regarding NFIP reform and reauthorization.

Continuous coverage—a top priority for PIA regarding NFIP reforms—would allow consumers to move to the private market without losing their NFIP subsidized rate so long as they maintain flood insurance on their property continually. Congressional leaders and the Federal Emergency Management Agency have sought ways to support the private flood market to give homeowners options regarding their flood insurance coverage. Many homeowners with NFIP policies may find better rates and coverages in the private market. However, they may decide not to pursue those options as leaving the NFIP would cause them to lose their subsidized rates. Should they wish to return to the NFIP due to changes in the private market, they could face significantly higher NFIP rates as a result of the lost subsidy. Allowing homeowners to access the subsidized NFIP rate as long as they continue to have flood insurance would help encourage more homeowners to shop for flood policies in the private market.

The Waters-McHenry bill does not contain a cut to Write-Your-Own reimbursement rate (currently 29.9%). Keeping the current reimbursement rate is another top priority for PIA. The WYO program allows private insurers to write NFIP policies and receive a reimbursement. The reimbursement is designed to cover the costs for the company to administer the program, including the compensation for independent agents who sell the policies for the carrier. Cuts to the reimbursement rate could likely lead to cuts to agent commissions on WYO policies. PIA has argued that independent agents provide valuable guidance to policyholders when purchasing NFIP policies and when the policyholder needs to file a claim.

As written, the Waters-McHenry bill still would aim to reduce NFIP subsidies by adjusting premiums to their actuarially sound rates. It would limit the percentage rates could increase annually. The legislation includes investments in flood mitigation and increases funding for flood mapping. With the rollout of FEMA’s Risk Rating 2.0 beginning in 2020, the Waters-McHenry bill has been designed to reform the system under the status quo while adapting to the new mapping system. The five-year reauthorization would allow Congress to look at how Risk Rating 2.0 changes the NFIP when the program would expire in 2024.

Due to the bipartisan support behind the bill at the committee level, enough members of the House may support to bill for it to pass. Opposition in the Senate may arise, particularly from senators in states that have been hit hard by storms in the past decade. An additional bill, sponsored by Rep. Nydia Velazquez, D-N.Y., also passed the U.S. House Financial Services Committee this week. It contains other provisions PIA supports, but lacks bipartisan sponsorship.

Currently, the NFIP is set to expire on Monday, Sept. 30, 2019, after a series of 12, short-term reauthorizations. The last substantive reforms occurred in 2012, although some were adjusted in 2014 due to political backlash. Waters-McHenry also reflects the issues that led to the 2014 amendments. Now that this legislation has passed committee, Congress has several months to pass it in the House; begin the process in the Senate; and get the final legislation to the president.

PIA will continue to follow the bill to ensure that any amendments do not alter PIA’s priorities as included in the current legislation.