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Menendez, Booker, Pallone, Pascrell Lead Bipartisan, Comprehensive Flood Insurance Reform Bill

Legislation extends National Flood Insurance Program for 5 yrs., institutes sweeping reforms to make it more sustainable, affordable

Washington, July 16, 2019

Today, U.S. Reps. Bill Pascrell Jr. (D-NJ-09) and Frank Pallone, Jr. (D-NJ-06) and Senators Bob Menendez (D-NJ) and Cory Booker (D-NJ) unveiled new, comprehensive, and bipartisan legislation to extend the National Flood Insurance Program (NFIP) for five years while instituting a series of sweeping reforms to address the waste, abuse, and mismanagement plaguing the system that led to delayed recovery for Superstorm Sandy survivors. 

“I remember touring the devastation of Sandy like it was yesterday. Homes damaged. Businesses destroyed. The mold. The sand. The debris. I spoke with my constituents who saw their entire lives swept away in an instant. I vowed that day never to stop fighting for them,” said Rep. Pascrell. “Our bipartisan, bicameral legislation will do a lot. Thanks to the hard work of Senator Menendez and Congressman Pallone, our bill helps people prepare prior to a storm with accurate maps and flood prevention investments. It strengthens the claims process so survivors get what they need to rebuild. It gives affordability safeguards to stop premiums from being jacked up. And it brings much-needed accountability to the Write Your Own program. We will be fighting hard to make sure we pass these changes into law. We owe it to Sandy victims.”  

“We’ve witnessed the NFIP fail our constituents in their greatest hour of need and, after countless reauthorizations that simply kick a broken can down the road, we want real reform,” said Sen. Menendez, a senior member of the Senate Banking Committee that oversees the NFIP and chair of the Sandy Task Force.  “With the National Flood Insurance Reauthorization and Reform Act of 2019, we can make the program more sustainable, more affordable, hold FEMA and private contractors accountable, and invest in the kind of forward-looking mitigation that reduces risk and prevents costly flooding in the first place.”  

“My constituents know all too well that a fair flood insurance program is critical for rebuilding in the wake of destructive storms. After Superstorm Sandy, insurance companies outright refused to make good on their promises to policyholders and instead pointed to the fine print while denying families who had lost everything. New Jerysans deserve a long-term flood insurance program reauthorization that improves the program based on the realities of major weather events like Sandy,” Congressman Pallone said. “This legislation will go a long way to strengthen our flood insurance program so that homeowners in my district are protected from the devastating effects of future flooding.”  

More than five million American families, including more than 220,000 New Jerseyans, depend upon the NFIP, which Congress must reauthorize before it expires on Sept. 30, 2019. The National Flood Insurance Program Reauthorization and Reform (NFIP Re) Act of 2019 tackles systemic problems with flood insurance, puts it back on solid fiscal ground, and reframes the nation’s entire disaster paradigm to one that focuses more on prevention and mitigation to spare the high cost of rebuilding after flood disasters. 

Led by Reps. Pascrell and Pallone in the House, this legislation is backed by Reps. Mikie Sherrill (D-NJ-11), Jeff Van Drew (D-NJ-02), Albio Sires (D-NJ-08), Bonnie Watson Coleman (D-NJ-12), Debbie Mucarsel-Powell (D-FL-26), Charlie Crist (D-FL-13), Tom Malinowski (D-NJ-07), Donald Norcross (D-NJ-01), Andy Kim (D-NJ-03), Donald M. Payne, Jr. (D-NJ-10), Stephanie Murphy (D-FL-07), Josh Gottheimer (D-NJ-05), and Chris Smith (R-NJ-04).

Companion legislation in the Senate is cosponsored by Sens. Bill Cassidy (R-La.), Cory Booker (D-N.J.), John Kennedy (R-La.), Chris Van Hollen (D-Md.), Marco Rubio (R-Fla.), Elizabeth Warren (D-Mass.), Kirsten Gillibrand (D-N.Y.), Jack Reed (D-R.I.), and Joe Manchin (D-W.V.).  

The NFIP Re Act of  2019 builds upon bipartisan, comprehensive reform legislation originally introduced in 2017 by Sen. Menendez, cosponsored by Sen. Booker and introduced in the House by Reps. Pallone and Pascrell.  It addresses critical problems with the program, administered by the Federal Emergency Management Agency (FEMA), following Superstorm Sandy and other disasters: unsustainability, low participation rates, inaccurate flood maps, indifference to the benefits of flood control infrastructure, agency mismanagement, unsustainable debt service costs and contractor profiteering.

The National Flood Insurance Program Reauthorization and Reform (NFIP Re) Act of 2019 

Long-Term Certainty.  Reauthorizes the NFIP for five years, providing certainty for communities. 

No Steep Rate Hikes under Risk Rating 2.0.  Protects policyholders from exorbitant premium hikes by capping annual increases at 9%. Currently, premiums can more than double every 4 years or less and FEMA’s new methodology called Risk Rating 2.0 will fundamentally alter premiums on every policy in the country.  This untested and unknown methodology could cause a rate shock and lead to unaffordability premiums, forcing homeowners to drop coverage or lose their homes.  We saw all too clearly the negative consequences of hiking premiums after the Biggert-Waters Act of 2012 caused costs to skyrocket, hurting policyholders and disrupting the real estate market.  This will put guardrails on FEMA’s new rating methodology, known as Risk Rating 2.0, and safeguard policyholders from sudden rate shocks.   

Affordability for Low- and Middle-Income Policyholders.  Provides a comprehensive means-tested voucher for millions of low- and middle-income homeowners and renters if their flood insurance premium causes their housing costs to exceed 30% of their Adjusted Gross Income, significantly increasing the affordability of the NFIP program.  

Path to NFIP Solvency.  Freezes interest payments on the NFIP debt and reinvests savings towards mitigation efforts to restore the program to solvency and reduce future borrowing. 

Limits on Private Insurance Company Profits. Caps Write Your Own (WYO) compensation at the rate FEMA pays to service its own policies and redirects the savings to pay for the means-tested affordability program.

Increased Cost of Compliance (ICC) Coverage.  Increases the maximum limit for ICC coverage to better reflect the costs of rebuilding and implementing mitigation projects. In addition, ICC coverage eligibility is expanded in order to encourage more proactive mitigation before natural disasters strike.

Strong Investments in Mitigation.  Provides robust funding levels for cost-effective investments in mitigation, which have a large return on investment and are the most effective way to reduce flood risk. 

More Accurate Mapping.  Authorizes funding for Light Detection and Ranging (LiDAR) technology for more accurate mapping of flood risk across the country, reducing confusion and generating better data.

Oversight of Write Your Own (WYO) Companies.  Creates new oversight measures for insurance companies and vendors, and provides FEMA with greater authority to terminate contractors that have a track record of abuse.

Claims and Appeals Process Reforms Based on Lessons from Sandy. Fundamentally reforms the claims process based on lessons learned in Superstorm Sandy and other disasters, to level the playing field for policyholders during appeal or litigation, bans aggressive legal tactics preventing homeowners from filing legitimate claims, holds FEMA to strict deadlines so that homeowners get quick and fair payments, and ends FEMA’s reliance on outside legal counsel from expensive for-profit entities.

Better Training.  Provides for increased training and certification of agents and adjusters to reduce mistakes and improve the customer experience.

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