H.R. 5740senamdt: To extend the National Flood Insurance Program, and for other purposes (Senate amendment to H.R. 5740)

H.R. 5740senamdt

To extend the National Flood Insurance Program, and for other purposes (Senate amendment to H.R. 5740)

May 30, 2012 (112th Congress, 2nd Session)

Staff Contact

Floor Situation

On Wednesday, May 30, 2012, the House is scheduled to consider a motion to concur in the Senate amendment to H.R. 5740, a bill to extend the National Flood Insurance Program, and for other purposes, under a suspension of the rules, requiring a two-thirds majority for approval.  The bill was originally introduced on May 14, 2012, by Rep. Judy Biggert (R-IL) and was referred to the Committee on Financial Services.  The House approved H.R. 5740 on May 17, 2012, by a vote of 402-18.

Bill Summary

The Senate amendment to H.R. 5740 would reauthorize the National Flood Insurance Program (NFIP) through July 31, 2012, and would amend the National Flood Insurance Act to exclude vacation homes and second homes from receiving subsidized premium rates.

The bill does not include any of the reform provisions included in H.R. 5740 as passed in the House.


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.


There was no Congressional Budget Office (CBO) cost estimate available for this legislation.