When U.S. Rep. Maxine Waters sponsored the Biggert-Waters Act of 2012, she wasn’t expecting the legislation to send flood insurance premiums skyrocketing out of control. To make amends for the damage—which could increase some policy premiums by 1000%—she set to craft a bill that would delay the increases for most home and business owners.
That bill should be law by the end of the year, Waters announced Friday.
The Homeowner Flood Insurance Affordability Act, Waters’ brainchild, is sponsored by 50 House members and 15 senators, and was put forward for congressional approval last month. If passed, it would effectively delay most of the premium insurance hikes until two years after FEMA completes an affordability study on the increases—a process expected to take two years to complete.
The legislation chiefly saves primary residences from flood insurance hikes, as well as those that have so-called “grandfathered” lower premiums. It would also ensure that homes and businesses sold after July 6 of last year won’t see dramatic rate increases.
Properties that have suffered repeated flooding will be excluded from the delay in rate increases, however, the bill stipulates.
The legislation’s sponsors have not yet released an estimate of how many home and business owners would benefit from the legislation’s passage, but Waters said she felt it was the right thing to do.
“I’m back here because my name is on this legislation,” she said. “I thought I have a responsibility to help make this right.
Even if the bill passes on Waters’ schedule, the legislation leaves long-term flood insurance rates up in the air—something large insurers don’t want to see.
“The reforms passed last year enabled the NFIP to start down a path toward fiscal viability,” said Jim Grande, president of the National Association of Mutual Insurance Companies. “Just one year in, it doesn’t make sense to put those reforms on hold.”
Grande noted that the National Flood Insurance Program is now $28bn in debt, largely due to the effect of Hurricane Katrina.
Still, for producers working with homeowners and small businesses, the delay in rate hikes may come as a relief.
“In Massachusetts, the new flood plan…is going to double and triple rates,” noted insurance veteran Francis DeYoung. “Some folks will be looking at flood premiums of $20,000 to $30,000.”
Those premiums just aren’t feasible for most home and business owners, and any delay may keep families in homes and employers in their offices.