Flood insurance premiums likely to rise if federal legislation ...

Higher premiums are likely for the nation?s 5.6 million National Flood Insurance Program policyholders under legislation moving through Congress.

A Senate bill expected to get its first committee vote next week would allow insurance premium increases of 15 percent a year, up from the current 10 percent limit but less than the 20 percent annual increases authorized under House legislation passed July12.

The Senate measure would require actuarial rates be phased in over two years for high-risk properties, those in 100-year flood planes. The House bill allows for a longer phase of five to six years.

The Senate bill, sponsored by Sens. Tim Johnson, D-S.D., and Richard Shelby, R-Ala., also recognizes the ?economic reality? that the program?s current $18 billion deficit ? most of it created from claims filed after Hurricanes Katrina and Rita in 2005 ? aren?t likely to be reduced anytime soon. The bill forgives the debt.

The House legislation contains a provision sought by Louisiana lawmakers that would allow coverage for business interruption or additional living expenses resulting from a major flood. The Senate doesn?t contain that provision.

The House bill also would allow maximum coverage levels to rise, starting in 2012, by the annual rate of inflation. an early draft of the Senate bill doesn?t contain the inflation adjustment provision.

Both bills would extend the flood insurance program for five years, bringing stability to a program that has received only brief extensions and several interruptions in recent years. At times, home sales were delayed because the home buyers couldn?t buy flood insurance.

The program, authorized by Congress in 1968, currently has 485,000 policyholders in Louisiana, according to FEMA. Average premiums are now $600 a year.

In a letter to the Senate authors, Sens. David Vitter, R-La., and Jon Tester, D-Mont., raised concerns with the bill?s quick two-year phase-in period for policyholders in high-risk communities.

?We share the concerns of the Government Accountability Office, which testified before the (Banking) Committee that sudden, that steep increases could reduce participation in the National Flood Insurance Program and increase taxpayer costs for post disaster assistance to property owners who no longer have insurance,? Vitter and Tester said in their letter.

They urged Johnson and Shelby to consider adding coverage for business interruption and increased living expenses caused by a major storm.

?In communities where insurance against business interruption and increased living expenses are not available through private markets, the National Flood Insurance Program would serve as a provider of last resort,? the two senators wrote.

They also recommended a fix for a decision by the U.S. Army Corps of Engineers to stop certifying flood-control structures. The corps cited fiscal problems.

But the corps, according to Vitter and Tester, still conducts periodic inspections of flood-control structures, although they don?t meet the accreditation standards established for the flood insurance program. The law should be changed to allow those inspections to be used by policyholders to demonstrate adequate flood protection for their communities.

?This measure would allow communities to use Army Corps of Engineers flood-control structure inspections to certify that their flood-control structures meet the accreditation requirements,? they wrote.

The Senate bill also would create a Scientific Resolution Panel to address mapping-related concerns from communities dissatisfied with the outcomes of their appeals to FEMA. it also sets up a Commission on Natural Catastrophe Risk Management and Insurance that would examine the risks posed by natural catastrophes, the means for mitigating those risks and paying for losses caused by natural catastrophes.

Bruce Alpert can be reached at balpert@timespicayune.com or 202.857.5131.

Flood insurance premiums likely to rise if federal legislation passes

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Source: http://www.business4noobs.com/flood-insurance-premiums-likely-to-rise-if-federal-legislation-passes/

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