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Institute for Crisis, Disaster, and Risk Management Crisis and Emergency Management Newsletter Website |
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March
2008
Volume
14
- Number 2 |
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National Flood Insurance Program Update By Justin T Solobay The U.S. Congress established the National Flood Insurance Program (NFIP) with the passage of the National Flood Insurance Act of 1968. The NFIP is a Federal program enabling property owners in participating communities to purchase insurance as a protection against flood losses in exchange for State and community floodplain management regulations that reduce future flood damages. Participation in the NFIP is based on an agreement between communities and the Federal Government. If a community adopts and enforces a floodplain management ordinance to reduce future flood risk to new construction in floodplains, the Federal Government will make flood insurance available within the community as a financial protection against flood losses. This insurance is designed to provide an insurance alternative to disaster assistance to reduce the escalating costs of repairing damage to buildings and their contents caused by floods. http://www.fema.gov/business/nfip/ Flooding claims from the 2005 hurricanes and other storms have put the NFIP more than $17.5 billion in debt to the U.S. Treasury - a debt that cannot be repaid solely through the premiums currently on the books. Congress is likely to forgive the debt, but will require significant reforms to the NFIP to guarantee additional income to the NFIP to pay future claims. Numerous efforts are underway in the House and the Senate to deal with this massive fiscal issue before September 30, 2008, when the NFIP is set to expire. Most recently, the House of Representatives passed a comprehensive NFIP reform bill, H.R. 3121, by a vote of 263-146 on September 27, 2007. In addition, the House also passed H.R. 3959. This bill would phase out subsidies in the NFIP on "single family properties used as principal residences" that are sold for $600,000 or more. Rep. Barney Frank (D-MA), Chairman of the House Committee on Financial Services stated during debate on H.R. 3959 that the bill would be considered together with H.R. 3121 when the House negotiates with the Senate on a final NFIP reform bill.
1) Extends the NFIP for five years to Sept. 30, 2013; 2) Increases coverage limits to $335,000 for residential and $670,000 for commercial properties, 3) Adds coverage for business interruption, 4) Raises the cap on annual premium increases to 15% from 10%; 5) Phases out subsidies for non-primary residences and non-residential properties beginning in 2011; and 6) Allows for the purchase of wind insurance through the NFIP.
1) Extends the NFIP for five years to Sept. 30, 2013; 2) Raises the cap on annual premium increases to 15% from 10%; 3) Phases out subsidies for non-primary residences and non-residential properties immediately by raising premiums by 25% per year until an actuarial rate is achieved. Unlike the House bill, S. 2284 does NOT : 1) Increases coverage limits; 2) Add coverage for business interruption; or 3) Allows for the purchase of wind insurance through the NFIP.
http://www.govtrack.us/congress/bill.xpd?bill=h110-3121 http://www.govtrack.us/congress/bill.xpd?bill=h110-3959
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