WASHINGTON – The Cape May County Chamber of Commerce heard details of a proposed bill that would reauthorize the National Flood Insurance Program and provide new capabilities to aid coastal communities.
The bipartisan bill was introduced by New Jersey Democratic Sen. Robert Menendez and Louisiana Republican Sen. Bill Cassidy.
Menendez’s legislative aide, Joseph Baiuca, presented highlights of the 176-page bill to a 50-person chamber audience attending the Zoom presentation.
Baiuca briefly reviewed the recent history of the National Flood Insurance Program, which has been locked in a series of short-term authorization and funding cycles for several years.
One goal of the bill is to provide long-term reauthorization for the program, freeing it from emergency funding that is tied to partisan debates over the annual federal budget.
As participants in the Zoom gathering noted more than once, that stability alone has enormous value since it prevents the seemingly regular interruptions and uncertainties surrounding real estate sales in coastal communities.
According to Baiuca, one of the other motivating factors for Menendez was the need to reduce the pace at which flood insurance rates could increase as part of the new Federal Emergency Management Agency (FEMA) Risk Rating 2.0 system.
The new rating system went into effect for new policies in fall 2021 and impacts existing policies as they are rewritten after April 1, 2022. The new rating system calls for annual increases in policy premiums of a maximum of 18%. The new bill would reduce the annual increase to 9%.
The new rating system moves the calculation of flood insurance premiums off a system that set rates based on a structure’s placement in a flood zone map and to a more granular model that assesses the actual risk and replacement value of a specific home or structure.
For some property owners, that is going to result in a significant rise in rates. The new rates may even produce, as Baiuca explained it, an 18% increase year after year for five to 10 years before the property is at the proper risk-driven premium level.
The bill is an attempt to reduce the likelihood that the new risk rating system, with its 18% per year increases in premiums, would drive people out of the flood insurance program, exposing property owners to greater risk and the government to larger disaster recovery needs following catastrophic storms.
The goal of the federal flood insurance program is increased membership, which the bill’s sponsors say is impossible to achieve with too steep an annual increase in rates. The program needs to be accessible, Baiuca said, in order to keep coastal communities functioning and maintaining their important contributions to the economy.
Baiuca also called attention to aspects of the bill that seek new investment in mitigation and mapping. These are the factors that tell homeowners and developers “where, how, and how high” to build new structures.
He said the legislation would also close loopholes that allowed “bad contractors” into the program and make it easier to rid the program of such contractors who are already participating.
Baiuca spoke on the Increase Cost of Compliance (ICC) coverage, which he agreed needs to be based on factors other than already existing substantial damage. ICC funds can provide help in raising structures to appropriate heights to meet new flood standards.
Baiuca and several participants in the meeting all agreed that the coverage levels today, set at a maximum of $30,000, need to be increased significantly to $60,000 or more if the program is going to achieve its intended goals.
Baiuca suggested that the ICC program trigger be based on changes in the community flood elevation levels rather than the current requirement that the home already sustained substantial damage from a storm.
A remaining problem with the ICC program also needs revision, but there was not a clear idea of what the revision should be or how it would work.
One participant in the call, Jim Rutala, said the program’s requirement that homeowners pay the upfront costs of elevating a structure and receive later reimbursement presents too high a hurdle for many property owners. Something that alleviates the 100% burden of upfront costs is necessary. Baiuca agreed and said it was an issue the senator’s team was looking at.
In the end, the most important question went without a clear answer. Asked twice for a timeline or possible schedule for passage of the bill, Baiuca hedged each time. The bill remains in the Senate Banking Committee, which has jurisdiction. There have been two hearings on the bill, Baiuca said. He pointed to the fact that the flood insurance program was now facing yet another short-term authorization, but he could give no prediction on a schedule for when this longer-term reauthorization bill might leave the committee.
Steve Morey, another participant in the call, expressed the hope that legislators from the “internal states” realized that they, too, face flood risks, noting the significant losses the program has had to confront from river flooding.
In the end, the bill, with many features that would aid coastal communities, may depend on the ability of its sponsors to create bipartisan support for long-term reauthorization in a congressional environment in which bipartisanship is no longer the norm.
To contact Vince Conti, email vconti@cmcherald.com.
