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Congressman Tom Marino

Representing the 10th District of Pennsylvania

Flood Insurance

Implications of Biggert-Waters and How You May Be Impacted

Many homeowners in the 10th Congressional District and across the country have been affected by recent, dramatic increases to flood insurance premiums.  Dince 1968, the National Flood Insurance Program (NFIP) has been assisting families and businesses to rebuild after devestating floods.

However, in the aftermath of natural disasters like Hurricane Katrina, Hurricane Rita and Superstorm Sandy, the program is now $28 billion in debt.

Congress enacted the Biggert-Waters Flood insurance Reform Act in 2012 to address this debt, however, the legislation unintentionally resulted in drastically increased premiums for some homeowners with flood insurance.

Surely Congress, myself included, would not have agreed to such legislation if these rate increases were known.  Unfortunately, the Federal Emergency Management Agency (FEMA) failed to predict rate increases of this magnitude.  FEMA failed to report to Congress on the affordability of implementation decisions, as required by law, and FEMA failed to warn buyers of such rate increases before they purchased their property, effectively lowering the value of their new purchases.

On April 28, 2016, the U.S. House of Representatives passed H.R. 2901, the Flood Insurance Market Parity and Modernization Act, sponsored by Representative Dennis Ross (FL-15). Rep. Marino (PA-10) is one of 44 co-sponsors and voted in favor of the legislation, which passed with unanimous support. This bill would widen the previously narrow definition of private insurance companies allowed to compete in the flood insurance market place. I am actively working with my colleagues to ensure a solution is reached. I am hopeful we will see even more progress by the time the National Flood Insurance Program comes up for reauthorization next year.Below are additional resources and information that you should find helpful in the meantime.

History of the National Flood Insurance Program (NFIP)

  • 1968 – creation of the NFIP by Congress to address the flood exposure - estimated 20,000 counties and towns have some degree of rick; flood insurance in the private sector is hindered by adverse selection, meaning only those with exposure tend to buy insurance
  • 1972 – Hurricane Agnes strikes the East Coast
  • 1973 – Congress enacts the Flood Disaster Protection Act, which establishes a mandatory flood insurance purchase requirement for structures located in Special Flood Hazard Areas (SFHA) that have federally backed mortgages
  • 1994 – Congress enacts the National Flood Insurance Reform Act, requiring that lenders purchase insurance and pass premiums onto homeowners
  • 2004 – Congress enacts the Flood Insurance Reform Act to reduce repetitive loss property payouts
  • 2005 to 2011 – Hurricanes Katrina, Ike and Irene, and Superstorm Sandy result in record losses and debts for the NFIP
  • 2012 – Congress enacts the Biggert-Waters Flood Insurance Reform Act

Key Points

  • Traditionally, the Federal Emergency Management Agency (FEMA) only charged rates that would cover losses for the year on a system wide basis rather than individual properties
  • According to a study cited by the non-partisan Congressional Research Service (CRS), the actual NFIP rates were about 1/3 of the true market risk cost for flood insurance – NFIP does not have to buy reinsurance, pay taxes, and spread risk through the mandatory purchase requirement and the borrowing authority.  Unlike other property/casualty insurance companies, the NFIP can rely on the federal borrowing authority to bail them out when losses exceed premiums collected
  • The NFIP is a federally backed insurance program, its policies are serviced and administrated by private insurance companies
  • As FEMA issues new Flood Insurance Risk Maps (FIRMs), properties are remapped into the SFHA which results in increased rates for those homeowners
  • FEMA uses modeling of rainfall and storm tide records, stimulates the likely discharge resulting from different magnitude of storms, which are used to estimate various flood depths.  Then, they estimate the depth of flooding for the properties and calculate the dollar damages using a state-damage curve derived from past flood events to set a 1% annual chance of flooding, commonly referred to as a 100 year floodplain – however, these risks are not indicative of prior flooding or mean that flooding will only happen every 100 years
  • Primary homeowners with pre-FIRM rates in the SFHA will continue to keep their current rates until:
    • ​Sale of the property
    • Policy lapse
    • Repetitive losses
    • Purchase of new policy
  • Pre-FIRM structures are buildings built before the effective date of the first FIRM for a community, meaning they were constructed before detailed flood hazard date and flood elevations were available for use to enact comprehensive regulations for floodplain construction
    • From the NFIP website: "The National Flood Insurance Program has "grandfathering" rules to recognize policyholders who built in compliance with the flood map in effect at the time of construction or who maintain continuous coverage."
  • However, as communities adopted new FIRMS, these grandfathered rates will be phased out as properties are sold and transferred, or as policies lapse.  Continuous renewal is a requirement for any grandfather exception

Additional information and helpful links