H.R. 1309: Flood Insurance Reform Act of 2011

H.R. 1309

Flood Insurance Reform Act of 2011

July 9, 2011 (112th Congress, 1st Session)

Staff Contact

Floor Situation

On Friday, July 8, 2011, the House is scheduled to begin consideration of the rule for H.R. 1309.  The rule provides for one hour of debate equally divided and controlled by the chair and ranking minority member of the Committee on Financial Services.  Additionally, the rule provides for 10 minutes of debate for each of the 25 amendments made in order, as well as one motion to recommit.  General debate on the bill is expected to begin next week.  H.R. 1309 was introduced by Rep. Judy Biggert (R-IL) on April 1, 2011, and referred to the Committee on Financial Services.  A mark-up session of the Committee was held on May 13, 2011, and the bill was reported (amended) by a vote of 54-0.

Bill Summary

H.R. 1309 would reauthorize the National Flood Insurance Program (NFIP) through September 30, 2016, and amends the National Flood Insurance Act.  The key provisions of H.R. 1309 include: (1) a five-year reauthorization of the NFIP; (2) a three-year delay in the mandatory purchase requirement for certain properties in newly designated Special Flood Hazard Areas (SFHAs); (3) a phase-in of full-risk, actuarial rates for areas newly designated as Special Flood Hazard; (4) a reinstatement of the Technical Mapping Advisory Council; and (5) an emphasis on greater private sector participation in providing flood insurance coverage.

The bill would provide the Federal Emergency Management Agency (FEMA) with the authority to continue selling and renewing policies through fiscal year 2016, otherwise scheduled to expire at the end of the current fiscal year.  As the Congressional Budget Office (CBO) notes, the program is assumed to continue in the CBO baseline, consistent with the rules governing baseline projections for mandatory programs.  Thus, extending the NFIP would have no effect on direct spending relative to the baseline. 

However, H.R. 1309 would make a number of technical changes to the program.  The two changes that would affect direct spending are:

1.     Premium increases for some pre-FIRM policyholders

  • The bill would direct FEMA to increase flood insurance premiums for pre-FIRM (Flood Insurance Rate Maps) properties that are: non-residential or non-primary residences; residences sold to new owners; or severe repetitive loss properties.  One year after enactment, all policyholders of properties in the above categories would begin receiving premium increases of 20 percent per year4 until the amount collected each year covers the actuarial cost of the insurance.  New policies that fit such criteria one year after enactment would immediately be required to pay the full-risk premium.

2.     Temporary discounted premiums for certain properties located in such areas

  • The bill would direct FEMA to charge subsidized premiums for certain properties newly mapped into a Special Flood Hazard Area (SFHA) after October 1, 2008.  Under the bill, owners of primary residences in new SFHAs would be charged 50 percent of the premium that applies under current law during the first year following the map’s effective date (or, in the case of properties eligible for a Preferred Risk Policy Extension, during the first year following the expiration of that extension). The legislation requires FEMA, in each successive year, to increase rates by 20 percent until the premium is equal to the amount that otherwise would be charged in the absence of this section.

Other changes that CBO estimates would affect the amount of flood insurance coverage and the amount of premiums collected but would not affect net direct spending include:

1.    Increasing the minimum-policy deductible

  • The bill would set the minimum deductible for structural coverage at $2,000 for subsidized properties and $1,000 for nonsubsidized properties.  Under current law, FEMA has the discretion to set a minimum deductible.

2.     Increasing the average annual limit on premium growth

  • The bill would authorize the NFIP to increase premiums within a specific risk category by an average of up to 20 percent per year.  Under current law, the limit is 10 percent. 

3.    Increasing the maximum coverage for structure and contents policies

  • The bill would adjust the total amount of flood insurance coverage available by increasing the current limit by the level of inflation from the end of fiscal year 1994 to enactment of the legislation.  The current limit is $350,000 for a residential policy and $1 million for a non-residential policy.

4.     Introducing new lines of insurance

  • The bill would direct FEMA to offer optional coverage of up to $5,000 for living expenses incurred during the loss of use of a personal residence and up to $20,000 for partial or total business interruption.

The net effect of these reforms, according to CBO, is an increase of $4.2 billion in net income to the program over the next ten years.

Additionally, H.R. 1309 would establish a Technical Mapping Advisory Council (TMAC) to develop and recommend new mapping standards for Flood Insurance Rate Maps (FIRMs).  The council would submit the new standards to FEMA and the Congress within 12 months of enactment and would continue to review those standards for four additional years, at which time the council would be terminated.  Beginning six months after the TMAC issues its initial set of recommendations, FEMA would be required to update all FIRMs within five years to incorporate the new standards.

The bill would also direct FEMA and the Government Accountability Office (GAO) to conduct studies and issue reports on topics such as: limiting the percentage of policies directly managed by FEMA, community-based flood insurance, building codes, varying risk behind levees, privatization of the NFIP, and the financial status and claims-paying ability of the program.


In 1968, Congress created the National Flood Insurance Program (NFIP) to address the nation’s flood exposure and the need to alleviate taxpayers’ responsibility for flood losses paid out in the form of post-disaster relief following annual flooding and severe flooding following hurricanes.  At the time, Congress recognized that the inherent challenges of managing flood risk were too great for the private sector and that no viable private sector insurance alternative existed.  The Flood Disaster Protection Act of 1973 established a mandatory flood insurance purchase requirement for structures located in identified Special Flood Hazard Areas. 

Under the 1973 Act, federally regulated lenders were obligated to require flood insurance on any mortgage issued or guaranteed by the federal government in a designated SFHA in a participating community.  By 1994, lax enforcement of the mandatory purchase requirements led Congress to require lenders to purchase coverage on behalf of—and bill premiums to—mortgagees who failed to purchase coverage on their own (called ‘‘forced placed insurance’’).  Since 1994, lenders who fail to enforce the mandatory purchase requirement have been subject to civil penalties. 

Eligible homeowners, renters, and business owners purchase coverage under the program either directly from the NFIP or, more often, from private insurers that voluntarily participate in the Write Your Own (WYO) program.  WYO insurers take responsibility for policy administration and claims processing but assume no financial risk in settling claims.  As of 2010, there are approximately 5.6 million residential and commercial policyholders under the NFIP.

The NFIP is administered by the Federal Emergency Management Agency (FEMA), which is housed in the Department of Homeland Security.  The NFIP reduces future flood losses through: (i) flood hazard identification; (ii) floodplain management (e.g., land use controls and building codes); and (iii) insurance protection.  The NFIP generated premium income of approximately $3.3 billion in 2010.  The 2005 hurricane season resulted in significant claims which the program’s annual premium income could not cover.  To pay the claims, the NFIP borrowed from the U.S. Treasury.  Prior to 2005, the NFIP’s borrowing authority had been limited by statute to $1.5 billion. Congress made up for the shortfall by increasing the program’s borrowing authority three times between September 2005 and January 2007 (from $1.5 billion to $20.8 billion).  The NFIP currently owes $17.775 billion to the U.S. Treasury. 

Since 2006, the Government Accountability Office (GAO) has identified the NFIP as ‘‘high-risk’’ because of inadequate management and insufficient funds. 


According to the Congressional Budget Office (CBO), pay-as-you-go procedures apply because enacting this legislation would affect direct spending. However, enacting this legislation would not affect revenues.

Under both current law and this legislation, the NFIP may borrow an additional $3 billion from the Treasury.  Assuming a small probability of a rare catastrophic event, CBO expects that this additional borrowing authority will be exhausted in 2014.  The changes made by this legislation would reduce the need to borrow from the Treasury—a source of direct spending—by a total of $165 million in 2013 and 2014, CBO estimates.  However, because the program would continue to operate with an annual net deficit, reduced borrowing in those years would be offset by increased borrowing in 2015.

CBO also estimates that the changes made by H.R. 1309 would increase net income to the NFIP by $4.2 billion over the 2012-2021 period, improving the financial status of the program by that amount.  However, CBO expects that additional income earned by the program would be used to fulfill existing obligations that would otherwise be delayed under current law.  Therefore, the bill would have no net effect on direct spending in the next 10 years.

H.R. 1309 would also authorize a number of other activities, the cost of which would be offset by fee collections paid by policyholders.  However, CBO estimates that other provisions would cost $317 million over the 2012-2016 period, subject to appropriation of the necessary amounts.

H.R. 1309 would impose intergovernmental and private-sector mandates, as defined in the Unfunded Mandates Reform Act (UMRA), on public and private mortgage lenders.  Because the mandates would require only small changes in existing industry practice, CBO expects that the cost to comply with the mandates would be small relative to the annual thresholds established in UMRA for intergovernmental and private-sector mandates ($71 million and $142 million in 2011, respectively, adjusted annually for inflation).


Amendment No. 1—Rep. Biggert (R-IL): The amendment would make a number of technical corrections to the bill.

Amendment No. 2—Rep. Bachus (R-AL): The amendment would extend the delay, to four or five years, in the mandatory purchase requirement for certain communities that are making more than adequate progress in construction of flood protection systems.

Amendment No. 3—Rep. Speier (D-CA): The amendment would prohibit lenders from requiring a homeowner to purchase more than the legally required minimum amount of flood insurance.

Amendment No. 4—Rep. Flake (R-AZ): The amendment would remove the sections of the bill authorizing new lines of insurance coverage for business interruption and cost of living expenses.

Amendment No. 5—Reps. Ros-Lehtinen (R-FL), Rivera (R-FL), Wilson (D-FL), Hinojosa (D-TX), Holt (D-NJ): The amendment would keep the annual limitation on premium increases at 10 percent.

Amendment No. 6—Rep. Matsui (D-CA): The amendment would require that newly mapped properties are phased-in to full actuarial rates over a five-year period in 20 percent increments.

Amendment No. 7—Reps. Terry (R-NE), Berg (R-ND): The amendment would protect policyholders during a “flood in progress” if the individual has purchased flood insurance and has not sustained any loss or damage within the 30-day execution window stipulated in section 1306(c) of the National Flood Insurance Act of 1968.

Amendment No. 8—Rep. Waters (D-CA): The amendment would amend the Flood Mitigation Assistance Program, the Repetitive Flood Claims Program, and the Severe Repetitive Loss Program.

Amendment No. 9—Rep. Palazzo (R-MS): The amendment would require adequate representation from Gulf Coast states on the Technical Mapping Advisory Council.

Amendment No. 10—Rep. Walberg (R-MI): The amendment would prohibit the issuance of any updated rate maps from the date of enactment until the Technical Mapping Advisory Council submits to the FEMA Administrator and Congress the proposed new mapping standards. The amendment would also allow for the revision, update and change of rate maps only pursuant to a letter of map change.

Amendment No. 11—Rep. Cardoza (D-CA): The amendment would eliminate requirements to more broadly map areas considered to be residual risk, such as areas behind levees and dams.

Amendment No. 12—Reps. Burton (R-IN), Stark (D-CA): The amendment would require written notification by first-class mail to each property owner affected by a proposed change in flood elevations, prior to the 90-day appeal period.  Notification would include and explanation of the appeals process and contact information for responsible officials.

Amendment No. 13—Rep. McGovern (D-MA): The amendment would allow communities to be reimbursed for certain costs associated with a successful challenge to a mapping error made by FEMA resulting in a Letter of Map Revision.

Amendment No. 14—Rep. Brady (R-TX): The amendment would require the FEMA Administrator to provide to a property owner newly included in a revised or updated proposed flood map a copy of the proposed flood insurance map and information regarding the appeals process at the time the proposed map is issued.

Amendment No. 15—Rep. Cuellar (D-TX): The amendment would require the FEMA Administrator to communicate with communities where flood insurance rate maps have not been updated in 20 years or more during the map updating process.

Amendment No. 16—Reps. Sherman (D-CA), Bachus (R-AL), Meeks (D-NY): The amendment would require FEMA to reduce the number of flood insurance policies that are directly managed by the Agency to not more than 10 percent of the total number of flood insurance policies in force.  The amendment would also authorize FEMA to refuse to accept future transfers of policies to the NFIP Direct program.

Amendment No. 17—Rep. Loesback (D-IA): The amendment would require FEMA to notify a local television and radio station of proposed changes to flood maps and would require the Administrator to grant an additional 90 day appeal period for property owners or communities if certify that there were individuals unaware of the proposed flood maps and existing 90-day appeal period.

Amendment No. 18—Rep. Palazzo (R-MS): The amendment would allow any claimant to obtain from the Administrator any engineering reports or other documents relied on in determining whether the damage was caused by flood or any other peril.

Amendment No. 19—Rep. Westmoreland (R-GA): The amendment would add a Reserve Fund requirement to the National Flood Insurance Program.

Amendment No. 20—Rep. Miller (R-MI): The amendment would terminate the NFIP television and radio advertising in all 50 states and would direct remaining funds to pay down the NFIP’s debt.

Amendment No. 21—Rep. Luetkemeyer (R-MO): The amendment would require the FEMA Administrator to submit within six months from the date of enactment a report on the agency’s processes and procedures for making a “flood in progress” determination.

Amendment No. 22—Rep. Canseco (R-TX): The amendment would require the FEMA Administrator to submit within six months from the date of enactment a report on how to repay within 10 years the amounts previously borrowed from Treasury by the NFIP, currently approximately $18 billion.

Amendment No. 23—Rep. Scott (D-VA): The amendment would direct the Comptroller General of the United States to conduct a study of the means and effects of establishing a market for all-peril insurance policies for residential properties.

Amendment No. 24—Rep. Walz (D-MN): The amendment would authorize the Army Corps of Engineers to provide specialized or technical services if requested by a state or local government to evaluate locally-operated levee systems which were either build or designed by the Corps and which are being reaccredited as part of the NFIP remapping process.  The amendment would ensure that all costs associated with evaluations would be covered by the requesting state or local government.

Amendment No. 25—Rep. Miller (R-MI): The amendment would terminate the NFIP by January 1, 2012 and would express Congressional consent for interested states to form interstate compacts to provide insurance.