On July 12, 2011, the U.S. House of Representatives passed the Flood Insurance Reform Act of 2011, H.R. 1309 (the “Act”), by a vote of 406 to 22.  As we previously reported, the Act has been endorsed by President Obama.  The goal of the Act is to the reform to the National Flood Insurance Plan (“NFIP”) in order to help reduce the more than $18 billion debt carried by the NFIP.

If enacted, the Act will institute the following reforms, among others:

  • Federal Emergency Management Agency (“FEMA”) will be required to use actuarial principles in determining full flood risk rates for certain properties;
  • FEMA will be prohibited from managing more than 10% of the aggregate number of flood insurance policies in force;
  • FEMA can refuse the transfer of future policies to the NFIP;
  • The NFIP will be required to carry a reserve fund;
  • Subsidies for high-risk locations, especially those prone to repeat claim, will be reduced;
  • The cap on annual premiums will increase from 10% to 20%; and
  • The expiration date of the NFIP will be extended through September 30, 2016.

Rep. Judy Biggert (R., Ill.), who heads the House Subcommittee on Insurance Housing and Community Opportunity, stated that the Act is “the first significant reform to the program in nearly a decade, [and] this bill will phase-out taxpayer-subsidized rates and restore the integrity of the flood mapping system. It also eliminates barriers to the development of a private flood insurance market, and helps take taxpayers out of the risk business. The NFIP is too important to let lapse, and too in debt to continue without reform.”

The Act now heads to the Senate for review.  Lawmakers hope to have it signed by President Obama before the end of September, when the NFIP is currently set to expire.