H.R. 5114: Flood Insurance Reform Priorities Act of 2010

H.R. 5114

Flood Insurance Reform Priorities Act of 2010

Rep. Maxine Waters

July 16, 2010 (111th Congress, 2nd Session)

Staff Contact

Floor Situation

H.R. 5114 is expected to be considered on the House floor on Thursday, July 15, 2010, under a structured rule with one hour of general debate, equally divided, and one Republican motion to recommit.  The legislation was introduced by Rep. Maxine Waters (D-CA) on April 22, 2010, and referred to the House Committee on Financial Services.  The Committee voted to report the bill out of committee by voice vote on May 26, 2010.

Bill Summary

Extension of the National Flood Insurance Program, Phase-In of Actuarial Rates and Mandatory Purchase Requirement for New Flood Hazard Areas

 H.R. 5114 would reauthorize the National Flood Insurance Program (NFIP) for five years through 2015.  The bill would also extend the Severe Repetitive Loss Pilot program through September 30, 2015.  Some Members may be concerned that CBO estimates that extending the pilot program would cost $132 million.

The bill would increase the maximum coverage limits for flood insurance policies.  The new coverage limits would be $335,000 (up from $250,000) for residences; $135,000 (up from $100,000) for residential contents; and $670,000 (up from $500,000) for nonresidential properties.

The bill would require the phase-in of actuarial rates (or the phase-out of subsidized rates), for commercial and non-primary residential pre-FIRM properties (e.g., vacation homes).  The phase-in would also apply to pre-FIRM single principal residences sold after enactment of this bill.  The phase-in would not apply to multifamily rental properties or rentals that are the primary residence of a tenant.  This provision would take effect three years after enactment of the bill.  Some Members may be concerned the delay in the phase out of subsidized rates would further expose the taxpayers to the risk of loss. 

The bill would delay for five years the mandatory flood insurance purchase requirement for areas newly designated as Special Flood Hazard Areas after September 1, 2008.  This provision would not delay the implementation of updated flood maps, notification of flood hazards, availability of flood insurance coverage, or the eligibility for mitigation assistance.


The legislation would phase in full-risk rates for areas newly designated as Special Flood Hazard Areas.  The rate phase in would be 20 percent per year for five years and begin after the end of the mandatory flood insurance purchase requirement delay (5 years).  The legislation would also increase the annual limitation on premium increases from 10 percent to 20 percent.  Some Members may be concerned the delay in the phase in of risk-based rates would further expose the taxpayers to the risk of loss. 

The bill would require FEMA to treat state or locally funded flood control projects equally with federally funded projects in NFIP regulations regarding flood insurance mapping and rating.  The bill would also direct FEMA not to impose the mandatory flood insurance purchase requirement and apply premium rates that would apply had the system met the standards for accreditation when communities relied on data and designs provided by a federal agency to build a flood protection system and through no design default and no other fault of the community's FEMA subsequently determined that the system would not meet 100-year risk protection standards for accreditation. 

 Premium Increases, Coverage for Additional Living Expenses, Minimum Deductibles for Claims, Enforcement, and Installments for Low-Income Policyholders

The bill would provide coverage for additional living expenses and business interruption. Coverage for additional living expenses would not be less than $1,000.  Business interruption coverage provided would be required to be structured by the FEMA Administrator in a manner consistent with the NFIP's existing underwriting capacity.

The legislation would increase the minimum annual deductibles for both pre-FIRM and post-FIRM properties.  The deductible for pre-FIRM properties would be increased to $1,500 for claims less than $100,000 and increased to $2,000 for claims greater than $100,000.  The deductible for post-FIRM properties would be increased to $750 for claims less than $100,000 and increased to $1,000 for claims greater than $100,000.  

The bill would create a flood insurance premium payment installment plan for low-income families.  Low-income families are defined as any family with an income level at or below 200 percent of the poverty level or that has no employed adult member.

The bill would increase to $2,000 the fine levied against federally-regulated lending institutions for each failure to enforce mandatory flood insurance purchase requirements and increasing the annual cap on fines for institutions to $1 million.   The cap would not apply to institutions that were assessed penalties of $1 million in any 3 of the last 5 years.  The bill also contains a “safe harbor” for lending institutions that make a good faith effort to comply with mandatory flood insurance purchase requirements, or if such a violation is not material in nature. 

The legislation would direct FEMA to require landlords to inform tenants about their property's location in a flood zone, the availability of flood insurance coverage, and how to purchase the coverage

Flood Insurance Outreach, Flood Insurance Advocate, and Required Studies

The bill would create a competitive grant program for communities that encourage homeowners to purchase flood insurance, where those homeowners are not legally required to do so, and to educate all residents about the benefits of flood insurance.  Additionally, the bill would require FEMA to report to Congress a description of its marketing and outreach efforts to educate consumers on obtaining flood insurance.  Additionally, the bill would require disclosure in the Real Estate Settlement Procedures Act (RESPA) good faith estimate regarding the availability of flood insurance and state that flood insurance would be available even if the home is not in a flood zone.  Some Members may be concerned that the establishment of a new outreach grant program, according to the CBO, represents approximately $222 million in new government spending over the next five years.   Also, while the bill would eliminate some subsidies, increase the limits on premiums and impose minimum deductibles, some Members may be concerned that rather than transferring underwriting to the private sector, outreach would ultimately expand a taxpayer backed government program that currently has an $18.75 billion deficit.

The bill would direct FEMA and HUD to develop a plan to verify that the recipients of Homeowner Assistance Grants in Mississippi and Road Home Grants in Louisiana, funded by HUD Community Development Block Grants, maintain flood insurance on their properties as required as a condition of the grants.

The legislation would create the position of National Flood Insurance Advocate in FEMA. The Advocate would do the following:  (1) assist NFIP's insureds with FEMA-related problems, (2) identify areas of contention between NFIP insureds and FEMA, (3) identify measures to mitigate such problems, and (4) help communities and homeowners interpret, implement and appeal floodplain maps.  Some Members may be concerned that CBO estimated the cost of the new office would be $23 million in new government spending over five years.

The bill would require several studies including a study, by GAO, designed to increase participation of low-income families in the flood insurance program.  CBO estimates the cost of the bills’ studies to be $1 million.


The NFIP, the largest single-line property insurer in the nation, provides coverage for more than five million properties.  Homeowners, renters and other businesses across the country are required to purchase flood insurance coverage through participating insurance agents and companies.  The companies receive an expense allowance for policies written and claims processed.  The agents earn a commission for policies sold and serviced, and the federal government retains responsibility for underwriting losses and paying claims.  The NFIP is currently operating on a shot-term extension through September 30, 2010.

When the NFIP’s losses exceed premiums, FEMA is authorized to borrow for the U.S. Treasury.  The NFIP is currently facing financial challenges.  The GAO has included the NFIP on its annual list of high-risk government programs since 2006 because of its ongoing potential to incur billions of dollars in losses.  With an $18.75 billion debt to the Treasury and the persistence of subsidized premium rates for properties in high-risk areas, the NFIP continues to be underfunded and federal taxpayers remain at risk.  Some Members may be concerned that the bill does not address or protect the taxpayers from the NFIP’s current $18.75 billion deficit.  According to the CBO, it is unlikely that the NFIP will pay this debt and will exhaust its remaining borrowing authority.  The NFIP is currently authorized to borrow up to $20.775 billion.

Lastly, FEMA is currently working on a multi-year flood map modernization program to update and revise more than 20,000 flood maps.  Some Members may be concerned that FEMA’s modernization plans may designate properties that historically have not been in flood zones to be included in such, if FEMA deems it appropriate.  Such a designation would require property owners to purchase flood insurance and comply with FEMA regulations.


The legislation would authorize the appropriation of $476 million over the 2011-2015 period, and $5 million in 2016.  CBO estimates that implementing those provisions would increase spending by about $378 million over the next five years, assuming appropriation of the necessary funds.


Rep. Waters (D-CA):  The amendment would do the following: (1) Phase out subsidized premiums for severe repetitive loss properties, substantially damaged or improved properties and policy holders who voluntarily allow flood coverage to lapse.  (2) Clarify application of actuarial rate phase-in for pre-FIRM properties sold after enactment.  (3) Provide preferred rate premium for properties participating in NFIP during newly established, 5-year delay in mandatory flood insurance purchase requirement.  (4) Expand availability of installment premium payment program to all policyholders.  (5) Clarify that the FEMA Director may work directly with property owners to make mitigation grants for certain repetitive loss properties where states or communities are either unable or unwilling to address repetitive loss issues with a property owner.  (6) Allow commercial properties with swimming pools located below the base flood level to enclose those pools with breakaway walls outside of hurricane season.  (7) Require FEMA to review mapping of surrounding properties following successful appeal of hazard designation in newly mapped areas.  (8) Clarify ability of FEMA Administrator to use demolition and rebuilding as mitigation techniques.  (9) Require study of the impact of working waterfronts on storm and flood risk.  (10) Establish relevant flood insurance related studies.  (11) Conform rule writing and implementation of various provisions of bill.  (12) Include other technical improvements.

Rep. Putnam (R-FL):  The amendment would require FEMA to annually submit a report to Congress on the effectiveness of grants awarded to local government agencies, the activities conducted and the effect of such activities on the retention or acquisition of flood insurance coverage.

Rep. Driehaus (D-OH):  The amendment would provide that if the owner of any property located in an area described in section 102(I)(1) of the Flood Disaster Protection Act of 1973 obtains a letter of map amendment during the 5-year period for such area referred to in such section, FEMA would be required to reimburse such owner, or such entity or jurisdiction acting on such owner’s behalf, for any costs incurred in obtaining such letter.

Rep. Flake (R-AZ):  The amendment would prohibit funds made available for grants from being used for earmarks.

Rep. Taylor (D-MS):  The amendment would prevent the Write Your Own insurance companies that contract with NFIP from excluding coverage of wind damage under their own policies solely because flooding also caused damage to the property.  It would establish requirements for adjustment by WYO insurers when there are claims on the same property, from the same event, for flood damage covered by NFIP and for wind damage covered by the WYO insurer.  Some Members may be concerned that this amendment would expand the program’s coverage and liabilities, which would further expose taxpayers.

Rep. Miller, Candice (R-MI):  The amendment would require the GAO to conduct a study on ways the private insurance market can contribute to insuring against flood damage; the impact on the National Flood Insurance Program if communities were to opt out; and the feasibility of regionalizing the National Flood Insurance Program so there is no cross-subsidization between regions.

Rep. Boswell (D-IA):  The amendment would attempt to ensure that occupants have relevant information on appropriate evacuation routes, and ensure the outreach program under the bill includes relevant information on where to obtain coverage.

Rep. Hill (D-IN):  The amendment would include “identifying ways to assist communities in efforts to fund the accreditation of flood protection systems” as a function of the Office of the Flood Insurance Advocate.

Rep. Loebsack (D-IA):  The amendment would require FEMA to notify a local television and radio station of proposed flood elevation determinations in addition to the current requirement of publication in a prominent local newspaper.  The amendment would also require FEMA to make such notifications for communities that have not yet been issued a Letter of Final Determination through the flood insurance map modernization process at the time of enactment.

Rep. McMahon (D-NY):  The amendment would (1) permit federal grants to educate local real estate agents in communities participating in the NFIP regarding the program and the availability of coverage under the program for owners and renters of properties and (2) establish coordination and liaisons with such agents to facilitate purchase of coverage and increase awareness of flood risk reduction.

Rep. Murphy, Scott (D-NY):  The amendment would require all funds authorized under the Act to be expended in a manner consistent with the manual on Standards of Ethical Conduct for Employees of the Executive Branch.