For other versions of this document, see http://wikileaks.org/wiki/CRS-RL34367 ------------------------------------------------------------------------------ Order Code RL34367 Side-by-Side Comparison of Flood Insurance Reform Legislation in the 110th Congress Updated June 24, 2008 Rawle O. King Analyst in Financial Economics and Risk Assessment Government and Finance Division Side-by-Side Comparison of Flood Insurance Reform Legislation in the 110th Congress Summary In 1968, Congress established the National Flood Insurance Program (NFIP) in response to severe flooding following a series of hurricanes in 1963, 1964, and 1965. The key policy objectives of the NFIP were threefold: (1) reduce the nation's flood risk through floodplain management; (2) improve flood hazard data and risk assessment by mapping the nation's floodplains; and (3) make affordable flood insurance widely available in communities that adopt and enforce measures to make future construction safer from flooding. Fiscally, the program had been self- supporting from the mid-1980s until the 2005 hurricanes. These storms exposed serious weaknesses, which Congress is attempting to address in an effort to return the NFIP to financial soundness. In the aftermath of the 2005 hurricanes, the NFIP faced unprecedented financial and regulatory strains. The program had to borrow $17.535 billion from the U.S. Treasury in order to pay claims and expenses. Those concerned about program challenges in the wake of the 2005 storms cite the increasing need to borrow from the U.S. Treasury, substantial premium discounts or cross-subsidies among classes of policyholders, outdated flood insurance rate maps, allegations of uneven compliance with mandatory purchase requirements, and questions as to the performance and efficiency of private insurers operating under the NFIP's Write Your Own program. Policymakers are now examining ways to strengthen the NFIP. On July 19, 2007, Representative Maxine Waters introduced H.R. 3121 to restore the financial solvency of the national flood insurance program. Chairman Barney Frank had introduced H.R. 1682, an earlier version of H.R. 3121, on March 26, 2007. H.R. 3121 is designed to make the program satisfy traditional criteria for actuarial soundness by phasing in actuarial premiums for owners of certain commercial properties and some residential properties that are not the owners' primary residence. H.R. 3121 would also: (1) raise civil penalties on federally regulated lenders who fail to enforce mandatory purchase of flood insurance for mortgage holders; (2) increase program participation incentives; (3) add coverage for wind as well as water damage; and (4) encourage revisions to flood maps. H.R. 3121 passed the House on September 27, 2007. On May 13, 2008, the Senate approved S. 2284, a flood insurance reform bill designed to increase the amount of premiums collected to meet the cost of expected claims under the NFIP. S. 2284 is substantially similar to H.R. 3121, except that the Senate legislation would forgive the program's outstanding debt to the Treasury and exclude coverage for wind damages. Some stakeholder groups have expressed concerns about making abrupt changes to the NFIP, particularly phasing out the subsidized premiums. They point to a need for flood insurance reform but say changes should be made in the broader context of program reauthorization. NFIP authority expires September 30, 2008. This report will be updated as events warrant. Contents Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Summary of H.R. 3121 and S. 2284 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 List of Tables Table 1. Side-by-Side Comparison of Flood Insurance Reform Legislation: H.R. 3121 and S. 2284 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Side-by-Side Comparison of Flood Insurance Reform Legislation in the 110th Congress Background In 1968, Congress established the National Flood Insurance Program (NFIP) in response to rising flood losses and as an alternative to ad hoc federal disaster assistance. The NFIP's insurance operation was self-supporting from the mid-1980s until the 2005 hurricane season when Hurricanes Katrina, Rita, and Wilma exposed serious flaws in the program. The 2005 Gulf Coast hurricanes were catastrophic disasters that required an estimated $19.28 billion in claims payouts under the NFIP. The program now faces unprecedented financial and regulatory challenges and a $17.535 billion debt owed to the U.S. Treasury. Members of Congress are concerned about the financial challenges facing the NFIP and the need to reauthorize the program before September 30, 2008. An important aspect of the financial challenges facing the program involves the rebuilding of the Gulf Coast region and the adequacy of the NFIP to meet the future commercial and multifamily real estate mortgage financial needs of all other communities. Without federal flood insurance, for example, lenders will often not be able to sell mortgages in coastal areas and other regions prone to flooding. Without a reliable and uninterrupted source of affordable flood insurance, mortgage credit and home ownership would be more expensive. The NFIP's financial status has prompted policymakers to focus on the strengths and weaknesses of the NFIP in managing and financing the nation's flood risk. Those concerned about program weaknesses typically cite the increasing need to borrow from the U.S. Treasury, substantial premium cross-subsidies among classes of policyholders, outdated flood insurance rate maps, allegations of uneven compliance with mandatory purchase requirements, and questions as to the performance and efficiency of the NFIP's Write Your Own program. Legislative efforts are now underway in Congress to reform the NFIP. On March 26, 2007, Representative Barney Frank introduced H.R. 1682, the Flood Insurance Reform and Modernization Act of 2007, in order to restore the financial solvency of the national flood insurance program. On July 19, 2007, Representative Maxine Waters introduced H.R. 3121 -- a bill that is substantially similar to H.R. 1682. As approved by the full House on September 27, 2007, H.R. 3121 would add two new sections to provide for optional wind damage coverage through the flood insurance program and to extend the NFIP five years through September 30, 2013. Section 4 of the bill was modified to reflect minor changes in the phase-in of actuarial rates beginning on January 1, 2011. CRS-2 On May 13, 2008, the full Senate approved S. 2284 to reauthorize the NFIP through 2013, increase the amount of premiums collected to reduce the cost of future claims, and expand the program to address concerns brought forth after the 2004 and 2005 hurricane seasons. S. 2284 is substantially similar to H.R. 3121, except that the Senate legislation would forgive the program's $17.5 billion in outstanding debt to the Treasury and exclude coverage for wind damages. Some stakeholder groups have expressed concerns about making abrupt changes to the NFIP, particularly phasing out the subsidized premiums. They point to a need for flood insurance reform but say changes should be made in the broader context of program reauthorization. NFIP authority expires September 30, 2008. Many private insurers oppose the inclusion of wind coverage, claiming the insurance industry is capable of insuring wind coverage. Opponents also stress that including the wind peril in the program would expose the program to unnecessary future indebtedness to the Treasury. Supporters insist that the federal flood insurance program lost billions due to its lack of a wind damage provision. The reason is that claim adjusters arguably attributed all damage, including obvious wind damages, to flood. CRS-3 Summary of H.R. 3121 and S. 2284 H.R. 3121 is substantially similar to S. 2284 in that both bills would modify the NFIP to bring more consumers into the system and gradually phase out premium subsidies currently available for structures built prior to the mapping and implementation of NFIP floodplain management requirements -- the so-called Pre- Flood Insurance Rate Maps (Pre-FIRM) structures.1 The bills would achieve these outcomes in different ways. Specifically, H.R. 3121 would: (1) phase out subsidized premiums for some policyholders; (2) require FEMA for the first time to map the nation's 500-year floodplain and areas that would be flooded if a dam or levee failed; (3) notify borrowers of requirements making flood insurance potentially available to all homeowners, and not just to those in the 100-year floodplain, as part of the Real Estate Settlement Procedures Act (RESPA) process; (4) provide for the purchase of optional insurance coverage for wind as well as water damage; and (5) extend the NFIP five years through September 30, 2013. S. 2284, like H.R. 3121, would phase out the premium subsidies on pre-FIRM properties, require mapping the 500-year floodplain and areas behind levees, require borrowers to be notified about the availability of flood insurance, and extend the program through fiscal 2013. The Senate bill, however, would: (1) forgive the debt owed to the Treasury; (2) continue to exclude coverage for wind damage; (3) establish a reserve fund that maintains a balance equal to 1% of total potential loss exposure of the program to pay extraordinary future claims; (4) establish an "ombudsman" or consumer advocate within FEMA to ensure that the Write Your Own companies pay claims in an appropriate manner; and (5) create a nonpartisan commission to examine the proper approach to manage catastrophic risks. Table 1 provides a detailed side-by-side comparison of key provisions in H.R. 3121 and S. 2284.2 1 Pre-FIRM buildings pay heavily discounted rates on the first $35,000 of their structure's insured value, and full risk-based premium rates for the remaining insured value. 2 Both the House and Senate passed versions refer to the FEMA "Director." In 2006, Congress enacted legislation (P.L. 109-295, 120 Stat. 1396) that identified the head of FEMA as the "Administrator." Table 1 uses the title "Administrator." CRS-4 Table 1. Side-by-Side Comparison of Flood Insurance Reform Legislation: H.R. 3121 and S. 2284 H.R. 3121 (Waters) S. 2284 Provision (Passed by House 9/27/07) (Passed by Senate 5/13/08) Title Flood Insurance Reform and Modernization Act of 2007 Flood Insurance Reform and Modernization Act of 2007 Purpose To protect the integrity of the NFIP by fully funding existing To address the program's debt to the U.S. Treasury and legal obligations and increasing (1) incentives for homeowners strengthen its financial solvency to ensure it can pay future claims. and communities to participate in the program and (2) (Sec. 102) awareness of both flood risks and the quality of information regarding such risks. Would also expand the NFIP to make optional wind coverage available to NFIP participants. (Sec. 2(a)) Program Extension Would reauthorize the NFIP five years through September 30, Same as H.R. 3121. (Sec. 104) 2013. (Sec. 27) Reform of Premium Rate Structure Increase in Annual Would authorize annual increase in NFIP premiums to be Would authorize annual increase in NFIP premiums to be capped Limitation on Premium capped at 15% (up from 10%). (Sec. 11) at 15% (up from 10%) for most properties and 25% for properties Increases that have lost the entitlement to subsidized rates. (Sec. 106) Reduction of Premium Would require the Administrator of the Federal Emergency Does not mention the phase-in of actuarial rates for pre-FIRM Rate Subsidies Management Agency (FEMA) to phase-in actuarial rates for structures but, beginning 90 days after the enactment of the law, nonresidential (commercial) pre-Flood Insurance Rate Map the potential to obtain less than actuarial rates is eliminated for (FIRM) properties and pre-FIRM properties that are not the "prospective insureds." This will apply to "prospective insureds" primary residence of either the owner or a tenant on January 1, who are policyholders of non-residential structures, non-primary 2011. FEMA would be authorized to assess an additional 15% residences, severe repetitive loss properties, properties that on top of routine annual rate increases for those properties undergo improvements or renovations exceeding 30% of the fair until the actuarial rate is achieved. Specifies that the aggregate market value of the property, and any property that sustains increase in chargeable premium rates during any 12-month damage exceeding 50% of the fair market value of the property period, however, may not exceed 20% for non-residential after enactment of the bill. [See below section, "Phase-In of Rate properties and 25% for non-primary residences. Increases From Remapping" for 2-year phase-in of actuarial rates (Sec. 4(c)(2)(B)) following the publication of new flood maps.] (Sec. 106) Extension of Premium Would require phase-in of actuarial rates on newly purchased Would prohibit the Administrator from offering flood insurance Rate Subsidy on New pre-FIRM properties using the same phase-in structure that to prospective insurers at less than actuarial rates if the property Policies or Lapsed Policies nonresidential and non-primary homes would be subject to is not insured within 90 days of enactment of the law, the policy under the legislation. (Sec. 4(b)(2)(C)) lapsed as a result of the deliberate choice of the policyholder or the prospective insured refused to accept an offer for mitigation assistance following a major disaster. (Sec. 106(a)) CRS-5 H.R. 3121 (Waters) S. 2284 Provision (Passed by House 9/27/07) (Passed by Senate 5/13/08) Minimum Annual No similar provision. Would increase the annual deductible from $1,000 to $1,500 for Deductible for Pre-FIRM pre-FIRM properties with coverage of less than $100,000, and Properties from $1,000 to $2,000 for pre-FIRM properties with coverage of more than $100,000. Minimum post-FIRM property deductibles would increase from $500 to $750 for coverage less than $100,000 and from $500 to $1,000 for coverage greater than $100,000. (Sec. 113) 5-Year Discount of Flood Would clarify that people forced to purchase flood insurance No similar provision. Insurance Rates for as a result of new flood insurance rate maps who have lived in Properties in Formerly an area where the levees were previously certified, and have Protected Areas now been decertified, will receive a grace period of five years in which they will be entitled to a 50% reduction in insurance premiums while the levees are being recertified. (Sec. 22(e)) Phase-In of Rate Increases Would require NFIP to provide a 5-year phase-in of flood Would require that owners of properties mapped into the 100-year From Remapping insurance premiums for newly covered low-cost properties flood plain must pay rates that accurately reflect the current risk placed within a floodplain through an updating of the flood of flood to such properties. Properties covered by flood insurance insurance rate maps if the value of the home does not exceed at the time of remapping will have the new rates phased in over a 75% of the state median home value. (Sec. 22(f)) two year period at the rate of 50% per year. The practical application of this provision would be a prohibition against NFIP's current practice of allowing properties that are mapped into the 100-year flood plain to indefinitely pay rates that reflect their old risk level. Would also prohibit the Administrator from adjusting the chargeable premium rate for properties in all areas located in the St. Louis District of the Mission Valley Division of the U.S. Army Corp of Engineers. (Sec. 108) Considerations in No similar provision. Would require NFIP to use actuarial principles in determining Determining Chargeable rates, and to consider catastrophic loss years in the calculation of Premium historical annual obligations of the NFIP. (Sec. 114) Mandatory Purchase Requirements Expansion of Mandatory Would require the Government Accountability Office (GAO) Would require that state chartered lending institutions must be Coverage Requirement to to conduct a study of the impact of amending the Flood subject to regulations by that state that are consistent with the State Regulated Lending Disaster Protection Act of 1973 to extend NFIP's mandatory NFIP's mandatory flood insurance purchase requirements. Institution purchase requirements to properties in special flood hazard (Sec. 109) areas (SFHA) that are covered by a mortgage loan issued by a non-federally regulated lending institution. (Sec. 3(a)(2)) CRS-6 H.R. 3121 (Waters) S. 2284 Provision (Passed by House 9/27/07) (Passed by Senate 5/13/08) Grants for Outreach to Would authorize $50 million for each of fiscal years 2008 No similar provision. Property Owners and through 2012 for FEMA to make grants to local government Renters agencies for outreach activities designed to encourage and facilitate the purchase of flood insurance. Local governments would use the grants to notify owners and renters about SFHA and the mandatory purchase requirement, and educate such owners and renters regarding the flood risk and the benefits and costs of maintaining or acquiring flood insurance. FEMA would be required to submit a report to Congress identifying and describing the marketing and outreach efforts under the NFIP. (Sec. 15(a)) Notification to Tenants of Would require the FEMA Administrator to notify tenants of No similar provision. Availability of Contents the availability of contents insurance and where to obtain Insurance coverage. Sets out contents of the notice. (Sec. 10) Notice of Flood Insurance Would amend Section 5(b) of the Real Estate Settlement Same as H.R. 3121. (Sec. 124) Availability Under Procedures Act of 1974 (RESPA) to create a new notice RESPA's Good Faith provision to ensure that individuals who purchase homes in Estimate areas of elevated flood risk (whether or not the property is located in a special flood hazard area) are made aware of the risk and given an opportunity to purchase flood insurance. (Sec. 20) Civil Penalties for Lending Would increase the civil penalty from $350 to $2,000 for Would increase the civil penalty from $350 to $2,000 for lenders Institutions lenders that do not enforce the mandatory flood insurance that do not enforce the mandatory flood insurance purchasing purchasing requirements. The annual cap on fines that can be requirement. (Sec. 110) levied against a lender would increase from $100,000 to $1,000,000. Would also add a "safe harbor" provision to protect mortgage lenders from "technical noncompliance" with flood insurance requirements and "unintended clerical errors" by stating that no penalties may be imposed on lenders who make good faith efforts to comply with the requirements. The $1 million cap would not apply to regulated lending institutions during a calendar year if, in any three of the five calendar years immediately preceding that calendar year, the institution was assessed penalties that totaled $1 million. (Sec. 6) CRS-7 H.R. 3121 (Waters) S. 2284 Provision (Passed by House 9/27/07) (Passed by Senate 5/13/08) Escrow of Flood Insurance Would require that lending institutions place flood insurance Would require state and federally-regulated lenders to include Payments payments into an escrow account on behalf of the borrower. NFIP premium amounts with each mortgage payments with these The requirement would apply to any mortgage outstanding or amounts being placed in escrow to pay the NFIP premium. entered into on or after the expiration of the 2-year period (Sec. 111(a)) beginning on the date of enactment of law. (Sec. 20) Study of Economic Effects Would require that the FEMA Administrator study and report No similar provision. However, would require GAO to report to of Charging Actuarially- to Congress on the economic effects of charging full actuarial Congress within one year of the enactment of the law the number Based Premium Rates for risk premiums on non-primary residence and non-residential and experience of NFIP insured properties constructed prior to Pre-FIRM Structures pre-FIRM structures. (Sec. 29) 1976 (pre-FIRM structures) or area mapping. (Sec. 132(c)) Coverage Maximum Coverage Would increase coverage limits from $250,000 (structure) and No similar provision. Limits $100,000 (contents) to $335,000 (structure) and $135,000 (contents) for any single-family dwelling and from $500,000 to $670,000 for structures and related contents of nonresidential properties. (Sec. 8) Mandatory Coverage Would require the GAO to study the regulatory, financial, and Would require the FEMA Administrator to issue new regulations Areas economic feasibility (i.e., costs of home-ownership, actuarial establishing a revised definition of areas of SFHA that reflect a soundness of program, lender compliance) of expanding the residual risk, including areas located behind levees, dams, or other standard for mandatory flood insurance purchase to include man-made structures. (Sec. 107(b)) properties in areas of residual risk that would flood if not for the presence of structural flood control measures such as Would require that homes located behind levees, dams, and other levees, floodwalls, and dams. (Sec. 3(a)(2)) man-made structures become part of special flood hazard areas (SFHA) and therefore subject to the insurance purchase requirements, but only after the mapping of all residual risk areas in the United States. (Sec. 107(c)) Availability of Insurance No similar provision. Would authorize the Administrator to make flood insurance for Multi-family Properties available to cover residential properties of more than four units. The maximum coverage amount would be equal to the coverage amount made available to commercial properties, which is $500,000 for structure and $500,000 for contents. (Sec. 105) Waiting Period for Would make coverage immediately effective if a policy is No similar provision. Effective Date of Policies purchased within 30 days of the purchase or transfer of a property. (Sec. 5) CRS-8 H.R. 3121 (Waters) S. 2284 Provision (Passed by House 9/27/07) (Passed by Senate 5/13/08) New Lines of Coverage Would provide optional coverage for: (1) additional living No similar provision. expenses following a flood loss when the residence is unfit to live in, (2) residential basement improvements (i.e., crawl spaces and other enclosed areas under buildings), (3) business interruption for commercial multifamily property, and (4) full replacement cost of the contents of properties. (Sec. 9) Extension of Pilot Program Would extend through 2012 the authorization of Would authorize the appropriation of $240 million and extend of Mitigation of Severe appropriations ($40 million a year from the National Flood the severe repetitive loss property pilot program through fiscal Repetitive Loss Properties Insurance Fund) for the mitigation pilot program that funds year 2013. preventive measures for severe repetitive loss properties (Sec. 130) (SRLP). SRLPs are defined as those that sustain four or more losses totaling more than $20,000, or two or more losses that cumulatively exceed the value of the property. (Sec. 17) Clarification of Would require the Administrator of FEMA, within three Would require that NFIP insurance policies explicitly state all Replacement Cost months of enactment, to: (1) issue plain language regulations conditions, exclusions and other limitations in plain English and Provisions, Forms, and to clarify the applicability of replacement cost coverage for in boldface type twice the font size of the body of the insurance Policy Language contents in the Standard Flood Insurance Policy; (2) revise any policy. Violations of this requirement would be subject to a fine regulations, forms, notices, guidance, and publications to more of not more than $50,000 at the discretion of the Administrator. clearly describe the meaning of full cost of repair or (Sec. 134) replacement under the replacement cost coverage; and (3) revise the language in flood insurance policies regarding rating and coverage, such as classification of buildings, basements, crawl spaces, detached garages, enclosures below elevated buildings, and replacement cost, to make flood policy provisions consistent with language used widely in homeowners policies. (Sec. 24) Financial/Borrowing Authority Borrowing Authority Debt No similar provision. Would eliminate any obligations owed to the U.S. Treasury by the Forgiveness NFIP to the extent such borrowed sums were used to fund the payment of claims resulting from the hurricanes of 2005. (Sec. 112) CRS-9 H.R. 3121 (Waters) S. 2284 Provision (Passed by House 9/27/07) (Passed by Senate 5/13/08) Borrowing Authority No similar provision. Would decrease the borrowing authority for the NFIP from Limits $20.775 to $1.5 billion. (Sec. 112) Reserve Fund No similar provision. Would establish in the U.S. Treasury the National Flood Insurance Reserve Fund to meet the expected future obligations of the NFIP in higher-than-average loss years. The Fund would be capitalized in an amount equal to 1% of total potential loss exposure of all outstanding flood insurance policies in force during the prior fiscal year. NFIP will be required to contribute 7.5% of reserve annually until the fund is fully capitalized. After achieving the target reserve, any reduction in the reserve would be replaced through contributions of at least 7.5% of the target amount of the reserve annually. If NFIP is not able to make the minimum contribution it must report that fact to Congress. (Sec. 115) Repayment Plan for Would require FEMA to submit a report to Congress that Would require that whenever the NFIP has to borrow from the Borrowing Authority includes a plan for repaying borrowed funds within 10 years. Treasury, FEMA would submit to Treasury and Congress a (Sec. 12) schedule for repayment of funds. This reporting requirement would continue every six months thereafter until the borrowed funds are repaid. (Sed. 116) Additional NFIP Staff Would authorize to be appropriated such sums as may be No similar provision. necessary for the NFIP to hire additional staff to implement the provisions of this Act. (Sec. 25) Mitigation Flood Mitigation Would eliminate the limitation on aggregate amount of No similar provision. Assistance Program assistance and allow for the use of Flood Mitigation Assistance (FMA) funds to demolish and rebuild damaged property. Amounts made available would not be subject to offsetting collections through premium rates for flood insurance coverage. (Sec. 18) CRS-10 H.R. 3121 (Waters) S. 2284 Provision (Passed by House 9/27/07) (Passed by Senate 5/13/08) Mitigation Grants for Would direct FEMA to provide mitigation grants to individual No similar provision. Individual Repetitive owners of repetitive loss properties in communities that do not Claims Properties participate in the NFIP. [These communities might not participate because they have withdrawn from the NFIP or the community cannot meet the federal requirements for qualifying for FEMA funding.] (Sec. 16) Verification and Would direct FEMA to develop a plan to verify that the No similar provision. Maintenance of Flood recipients of Homeowner Grant Assistance Program in Insurance on Homeowner Mississippi and Road Home Grants in Louisiana, funded by Assistance Grants in Department of Housing and Urban Development Community Mississippi and Road Development Block Grants, maintain flood insurance on their Home Grants in Louisiana properties as required as a condition of receiving the grants. (Sec. 32) Claims and Write-Your-Own (WYO) Insurers Administrative Expense of Would require Write-Your-Own (WYO) companies to submit Would require the FEMA Administrator not later than 180 days Write-Your-Own to FEMA an annual report of all administrative and operational after enactment to conduct a rulemaking proceeding to devise a Insurance Companies costs of the program, along with a biennial independent audit data collection methodology to allow FEMA to collect consistent conducted by a certified public accountant. Would require the information on the expenses of WYO companies. Would require FEMA Administrator review the records and audits to WYO companies, within 60 days after the effective date of the determine if such payments are reasonable. (Sec. 31) final rule, to submit 5 years of expense levels for selling, writing, and servicing policies based on that methodology. The Administrator would be required to conduct a rule-making proceeding to formulate revised expense reimbursement levels for the WYO companies expenses in selling, writing, and servicing flood insurance policies. Would also require the Administrator to submit a report to Congress on the rationale and purpose of the rule and degree to which such rule accurately represents the true operating cost and expenses of WYO companies. (Sec. 129) Information from Write- No similar provision. Would require that within 20 days of enactment, WYO insurers Your-Own Insurers must provide to the FEMA Administrator any biennial report prepared in the prior five years. The Administrator must provide these reports to GAO not later than 10 days after receiving the report for the WYO insurer. An insurer that fails to provide the report would be reported to Congress by the Administrator and fined $1,000 per day. (Sec. 129(a)) CRS-11 H.R. 3121 (Waters) S. 2284 Provision (Passed by House 9/27/07) (Passed by Senate 5/13/08) FEMA Participation in Would permit state insurance commissioners to submit a Same as H.R. 3121. (Sec. 126) State Disaster Claims request to the Administrator of FEMA to have FEMA Mediation Programs participate in state-sponsored nonbinding mediation of catastrophe-related insurance claims that may involve a combination of flood and other losses. All statements made and documents produced during the mediation would be deemed privileged, and would be considered confidential settlement negotiations made in anticipation of litigation. Participation in the mediation would not affect or expand the liability or rights or obligations of any party in contract. FEMA would not be required to pay any mediation fees. (Sec. 13) Reiteration of FEMA Under the Bunning-Bereuter-Blumenauer Flood Insurance Would reiterate the responsibility of FEMA under the 2004 Responsibility Under the Reform Act of 2004 (P.L. 108-264; 118 Stat. 712), would Reform Act to establish minimum training requirements, and 2004 Reform Act "again" direct FEMA to establish an appeals process within 90 require that FEMA report to Congress within three months after days of enactment that policyholders can use to resolve enactment, describing the implementation of each provision in the decisions of the Administrator relating to claims, proofs of 2004 Reform Act. loss, and loss estimates. (Sec. 127) Would require the Administrator to continue to work with the insurance industry, state insurance regulators, and other interested parties to implement previously developed minimum training and education standards for all insurance agents who sell flood insurance policies. (Sec. 21) Would require the Administrator to submit a report to Congress within six months describing FEMA's implementation of provisions in the Reform Act of 2004. (Sec. 21) Extension of Deadline for Would extend to 180 days the period of time policyholders No similar provision. Filing Proof of Loss have to file proof of loss of property. The FEMA Administrator would not be able to deny a claim for damage based solely on the failure of the policyholder to meet such deadline if the insured demonstrates a good cause for such failure. (Sec. 26) Payment of Claims to Would prohibit FEMA from enforcing penalties assessed Same as H.R. 3121. (Sec. 117) Condominium Owners against individual condominium owners where the condominium association is underinsured. (Sec. 30) Extension of Pilot Program Would authorize an extension of the pilot program for Same as H.R. 3121. (Sec. 30) CRS-12 H.R. 3121 (Waters) S. 2284 Provision (Passed by House 9/27/07) (Passed by Senate 5/13/08) for Mitigation of Severe mitigation of severe repetitive loss properties from FY2008 Repetitive Loss Properties through 2012. (Sec. 17) Authority of FEMA to No similar provision. Would authorize the FEMA Administrator to collect from WYO Collect Information on insurers any information and data needed to determine the Claims Payments accuracy of flood claims resolution. The type of information to be collected would include (1) adjuster flood and wind damage assessments; (2) amount paid for wind and flood elements of the claim; (3) total amount paid to the claimant from all parties as a result of the event; (4) amount paid by the insurer for other flood losses; and (5) total amount paid to the policyholder by the insurer for all flood. (Sec. 128) Multiple Peril Coverage for Flood and Windstorm Losses Multiperil Coverage for Amends Section 1304 of the National Flood Insurance Act of No similar provision. Flood and Windstorm 1968 to enable the purchase of optional insurance against both flood and windstorm losses. Requires communities that participate in the NFIP to adopt adequate criteria for land management and use. Would authorize the FEMA Administrator to study and investigate to determine appropriate measures (e.g., laws, regulations, and ordinance relating) that could be adopted in windstorm-prone areas with respect to windstorm risks, zoning building codes, building permits, subdivision and other building restrictions for such areas, and windstorm damage prevention. The Administrator would be required to use the study results to establish comprehensive criteria designed to reduce damages caused by windstorms. Establishes limits on the amount of coverage to not exceed the lesser of the replacement cost for covered losses or $500,000 for single-family dwelling, $1,000,000 for non-residential structure and $750,000 for contents. (Sec. 7) Would allow multiple peril and flood insurance coverage of multiple dwelling residential structures up to the total number of dwelling units times the maximum coverage limit per residential unit (Sec. 7(a)(7)(A)). Prohibits a WYO company from including language in its own homeowners' and windstorm policies that would exclude coverage of wind damage solely because flooding also contributed to the damage. (Sec. 35) Would require that the contract between the WYO and the NFIP state that the insurer has a fiduciary responsibility to federal taxpayers and will act in the best interests of the NFIP. (Sec. 35) CRS-13 H.R. 3121 (Waters) S. 2284 Provision (Passed by House 9/27/07) (Passed by Senate 5/13/08) Flood Mapping National Flood Mapping Would require the Administrator in consultation with the Would require FEMA to establish an ongoing flood mapping Program Technical Mapping Advisory Council to establish an ongoing program to review, update and maintain flood insurance rate program to review, update, and maintain flood insurance rate maps, including all flood-risk zone areas within the 100-year and maps. Each map shall include a depiction of the 500-year 500-year floodplains and areas of residual risk, including those floodplain, as well as "residual risk" areas behind levees and protected by levees, dams, and other man-made structures. flood control dams. Updated flood maps would include (Sec. 119) relevant information on coastal inundation provided by the Army Corps of Engineers, storm surge modeling by the Administrator would be authorized to establish or update flood- National Oceanic and Atmospheric Administration (NOAA), risk zone data in residual risk areas and make estimates of and stream flows, watershed characteristics, and topography probable flood caused losses for the various flood risk zones. provided by the U.S. Geological Survey (USGS). Would (Sec. 119) require that no changes in flood insurance status can go into effect until the remapping process is completed for the entire Army Corp of Engineers district affected by the map. (Sec. 22(a)) Would require the Administrator to: (1) establish standards to FEMA would be required to use the most accurate and consistent ensure the adequacy and consistency of maps and methods of data in mapping program. (Sec. 122) data collection and analysis; (2) give priority to updating and maintaining maps of coastal areas affected by Hurricanes Katrina and Rita in order to provide guidance with respect to hurricane recovery efforts; and (3) submit a report to Congress that describes the flood map modernization activities by June 30 of each year. Would require FEMA, when practical, to utilize emerging Would require the various federal departments to work together weather forecasting technologies, and consider the impacts of to coordinate mapping and risk determination budgeting, and global warming and the potential future impacts of global requires the Office of Management and Budget (OMB), FEMA climate change-related weather events, in assessing flood and and other federal agencies to submit a joint report to Congress storm risks. within 30 days of the budget submission on the crosscutting budget issues with respect to mapping. (Sec. 121(a)) After each flood map is updated, FEMA shall, in consultation Same as H.R. 3121. (Sec. 119(d)(2)) with the chief executive officer of each community affected, conduct a program to educate the community about the updated flood insurance maps. Would authorize the appropriation of $400 million for each of Same as H.R. 3121. (Sec. 119) fiscal years 2008 through 2013. (Sec. 22) CRS-14 H.R. 3121 (Waters) S. 2284 Provision (Passed by House 9/27/07) (Passed by Senate 5/13/08) Floodplain management No similar provision. Would require the Secretary of Department of Homeland Security, Coordination the Administrator of FEMA, the Director of the Office of Management and Budget (OMB), and the heads of each federal department or agency to work together to ensure that flood risk determination data and geospatial data are shared among all federal agencies in order to coordinate the efforts of the nation to reduce its vulnerability to flood hazards. (Sec. 121(a)) The Director of OMB, in coordination with FEMA, USGS, NOAA, USACE and other federal agencies, must submit to Congress, within 30 days of submitting the budget of the United States, an interagency budget crosscut report showing the budget proposed for each of the federal agencies working on flood risk determination data and digital elevation models. Sec. 121(a)) Removal of Limitation on No similar provision. Would remove the current prohibition that prevents states from State Contributions for contributing greater than 50% of the cost of revising and updating Updating Flood Maps map modernization. (Sec. 120) Nonmandatory Would authorize FEMA to include a note on flood insurance Would require the FEMA Administrator to provide notice to any Participation in the 500- rate maps identifying 100-year and 500-year certified levees community located in the 500-year floodplain within six months Year Floodplain Areas and encourage property owners to evaluate their risk of after the date of completion of the initial mapping of the 500-year flooding. Would clarify that the note shall not be considered floodplain. Regulatory lending institutions, as a condition of a legal requirement of participation in the NFIP. making loans secured by property located within the 500-year (Sec. 36) floodplain, would be required to notify the purchaser or lessee and the servicer of the loan that such properties is within the 500-year floodplain. Federal and state lenders would be subject to penalties for noncompliance. (Sec. 123) Would exempt property within the 500-year floodplain from the mandatory purchase requirement. The NFIP and federal or state lending institutions must notify communities that they are located within the 500-year floodplain (i.e., an area with at least a 0.2% chance of being inundated with water in any year). [Owners of properties within the 500-year floodplain, but outside of the 100- year floodplain, would not be subject to mandatory purchase requirements but might voluntarily purchase flood insurance upon receiving notification of potential risk. ] (Sec. 123) CRS-15 H.R. 3121 (Waters) S. 2284 Provision (Passed by House 9/27/07) (Passed by Senate 5/13/08) Technical Mapping Would reestablish the Technical Mapping Advisory Council, Similar to H.R. 3121, but also would add two additional members Advisory Council and establish terms of office, to provide direction and to the Advisory Council, one representing a state agency that has assistance to the Administrator of FEMA concerning flood entered into a cooperative technical partnership with the mapping activities. The Council would include, among others, Administrator and has demonstrated the capability to produce representatives from the U.S. Army Corps of Engineers, local FIRMs and the other a local governmental agency that has done and regional flood and storm water agencies, state geographic the same. information coordinators, and flood insurance servicing (Sec. 118(b)) companies. (Sec. 22(b)) Post-Disaster Flood Would allow the Administrator of FEMA to issue interim No similar provision. Elevation Determinations flood elevation requirements for any areas affected by flood- related disaster. Interim elevation determinations would take effect immediately upon issuance and may remain in effect until FEMA established new flood elevations for such area. (Sec. 22(c)) Communities may request updates after repairs to flood projects, at no cost. (Sec. 22(d)) Building Codes in Would authorize FEMA to submit a report to Congress on the See section below entitled, "FEMA Report on Building Codes." Floodplain Management regulatory, financial and economic impacts of including (Sec. 135) Criteria nationally recognized building codes as part of the floodplain management criteria of the NFIP. (Sec. 28) Interagency Coordination No similar provision. Would require FEMA to contract with the National Academy of Study Public Administration to conduct a study on how FEMA can improve interagency and intergovernmental coordination on flood mapping and funding, and how FEMA can establish joint funding mechanisms with other federal agencies and units of state and local governments to share the collection and use of data for mapping. (Sec. 122) Testing of New No similar provision. Would authorize the building of temporary residential structures Floodproofing for the purpose of testing new floodproofing technologies. This Technologies activity would not be considered in violation of any flood risk mitigation plan developed by a state or community and approved by the Administrator of FEMA. (Sec. 125) CRS-16 H.R. 3121 (Waters) S. 2284 Provision (Passed by House 9/27/07) (Passed by Senate 5/13/08) Notification of Appeal of Would require FEMA Administrator to notify the chief No similar provision. Map Changes and executive officer of local communities about their right to Notification of appeal projected base flood elevation determinations, and the Establishment of Flood contact information of the person who handles appeals at Elevations FEMA. The Administrator would also be required to publish a notice in the Federal Register and local newspapers of such change and provide written notification by first class mail to each property affected by a proposed change in flood elevation, prior to the 90-day appeal period. Notification would include an explanation of the appeals process, the status of each property with respect to flood zone and flood insurance requirements under the act, and contact information for responsible officials. (Sec. 23) Coordination of Flood No similar provision. Would require the leadership of DHS, OMB and other federal Risk Determination Data agencies to work together to ensure that flood risk determination Sharing and Budgeting data and geospatial data are appropriately shared among federal Efforts agencies in order to coordinate the effort of the nation to reduce its vulnerability to flooding hazards. Would require the Director of OMB, in consultation with FEMA, USGS, NOAA, and the Army Corp of Engineers, to submit an interagency budget crosscut report that displays the budget proposed for each of the federal agencies working on flood risk determination data and digital elevation models. (Sec. 121) Flood Insurance Advocate Would authorize the creation of the position of National Flood Would establish an Office of the Flood Insurance Advocate with Insurance Advocate in FEMA, who would report to FEMA the power to assist claimants with NFIP claims, including Administrator. The national advocate would transmit a intervention in specific claims; identify changes that could resolve comprehensive report to Congress about the major problems problems claimants experience with flood claims; audit and facing the NFIP and report to Congress 6 months after investigate insurers to ensure that only flood losses are allocated enactment about the feasibility and effectiveness of to NFIP policies; investigate insurers to ensure they are settling establishing an Office of the Flood Insurance Advocate, flood claims in good faith; conduct investigations relating the headed by the National Flood Insurance Advocate, to assist flood program to promote efficiency and reduce fraud and insureds in resolving problems with the NFIP, including issues conflicts of interests; request documents and testimony; and related to bureaucratic obstacles in the event of a disaster. The establish regional flood insurance advocates. (Sec. 131) Administrator would be required to submit the report to Congress. (Sec. 34) CRS-17 H.R. 3121 (Waters) S. 2284 Provision (Passed by House 9/27/07) (Passed by Senate 5/13/08) Commission on Natural Catastrophe Risk Management and Insurance Commission on Natural No similar provision. Would establish a 16-member nonpartisan Commission on Natural Catastrophe Risk Catastrophe Risk Management and Insurance ("Commission") to Management and examine the risks posed to the United States by natural Insurance catastrophes, and the means of mitigating those risks and paying for losses caused by natural catastrophes. The Commission would examine such issues as: (1) the condition of the property and casualty insurance and reinsurance markets prior to and in the aftermath of Hurricane Katrina, Rita, and Wilma in 2005, and the four major hurricanes that struck in 2004; (2) the current ability of states, communities, and individuals to mitigate their natural catastrophe risks, including the affordability and availability of such activities; (3) the exposure of the U.S. to natural catastrophes; (4) the catastrophic insurance and reinsurance markets and the relevant practices in providing insurance protection; (5) implementation of a catastrophic insurance system that can resolve key obstacles impeding broader implementation of catastrophic risk management and financing with insurance; (6) the financial feasibility of a national, regional, or other pooling mechanism designed to provide adequate insurance coverage and increased underwriting capacity to insurers and reinsurers, including private-public partnerships to increase insurance capacity in constrained markets; (7) methods to promote public insurance policies to reduce losses caused by natural catastrophes in the uninsured sectors of the U.S. population; (8) approaches to address access to insurance in low-income communities; (9) the impact of federal and state laws, regulations, and policies on the affordability and availability of catastrophe insurance and the capacity of private catastrophe insurance markets; (10) the financial condition of state residual markets and catastrophe funds in high-risk regions; (11) the role that innovation in financial services, and specifically risked-linked securities, in improving the affordability and availability of natural catastrophe insurance; (12) the need for strengthened land use regulations and building codes in states at high risk for natural catastrophes; and (13) the appropriate role, if any, for the federal government in stabilizing the property and casualty insurance and reinsurance markets. (Sec 205) CRS-18 H.R. 3121 (Waters) S. 2284 Provision (Passed by House 9/27/07) (Passed by Senate 5/13/08) No similar provision. The Commission would submit a report to Congress not later than 9 months after enactment with a possible 3-month extension. (Sec. 206) No similar provision. The Commission would terminate 90 days after the date on which the Commission submits its report. (Sec. 209) No similar provision. Would authorize to be appropriated such sums as may be necessary to complete the work of the Commission. (Sec. 210) GAO Studies and Other Reports GAO Study of Methods to Would direct GAO to conduct a study of potential methods, No similar provision. Increase Participation of practices, and incentives that would increase the degree to Low-Income Families in which low-income property owners living in high-risk areas the NFIP participate in the NFIP. The study would analyze the feasibility of providing coverage to low-income families at discounted rates, the amounts of the discount to make it affordable, and the extent to which low-income families would be affected by expanding the mandatory purchase requirements. (Sec. 19) Report on Financial Would require FEMA to submit an annual report to Congress Would require GAO to conduct a study and submit a report to Conditions of NFIP on the financial status of the program. The report would Congress on NFIP's activities and financial health, including the include information on the current and projected levels of amount paid in premiums, losses, expenses, number of policies, claims, premium receipts, expenses, and Treasury borrowing insurance in force, estimate of average loss year and a description under the program. (Sec. 14) and amount of claims paid. (Sec. 132(b)) GAO Report on Would require the GAO to study the regulatory, financial, and Would require GAO to submit a report to Congress on: (1) the Expanding the NFIP economic feasibility (i.e., costs of home-ownership, actuarial number of flood insurance policyholders currently insured; (2) the soundness of program, lender compliance) of expanding the increased losses the NFIP would have sustained during the 2004 standard for mandatory flood insurance purchase requirement and 2005 hurricane seasons if the program had insured all policies to include (1) properties in areas of residual risk that would up to $417,000, and (3) the availability in the private marketplace flood if not for the presence of structural flood control of flood insurance coverage in amounts that exceed the current measures such as levees, floodwalls, and dams (Sec. 3(a)(2)); coverage limits. (Sec. 132(a)) and (2) properties that are located in any area having special flood hazards and which secures the repayment of a non- federally related loan. (Sec. 3(a)(3)). CRS-19 H.R. 3121 (Waters) S. 2284 Provision (Passed by House 9/27/07) (Passed by Senate 5/13/08) GAO Review of FEMA No similar provision. Would require GAO, in conjunction with the DHS Inspector Contractors Generals Office, to review the three largest contractors FEMA uses in administering the NFIP. (Sec. 132(d)) GAO Study on Pre-FIRM Would authorize GAO to issue a report on the status of the Would require GAO to conduct a study of pre-FIRM structures Structures pre-FIRM properties including the number of properties, cost that are receiving discounted premium rates. This study would be of providing coverage, the rate at which such properties will designed to determine the number and types of pre-FIRM cease to be covered under the program and the effects of the structures and who owns the properties, their locations, and 2004 Reform Act will have on pre-FIRM properties. (Sec. 3) property values. (Sec. 132(c)) GAO Study of Multiperil Would authorize GAO to conduct a study of the effects of the No similar provision. Insurance Program on multiperil insurance program on enrollment and pricing of State Residual Markets state residual property and casualty markets or plans and state catastrophe plans. (Sec. 33) FEMA Report on Building Would authorize FEMA to submit a report to Congress on the Would require FEMA to conduct a study and submit a report to Codes regulatory, financial and economic impacts of including Congress on the impact, effectiveness and feasibility of including nationally recognized building codes as part of the floodplain nationally recognized building codes as part of FEMA's management criteria of the NFIP. (Sec. 28) floodplain management criteria. The study would determine, among other things, the regulatory, financial, and economic impacts of the building code requirement on homeowners, states and local communities, local land use policies, FEMA, the state and local community resources needed to enforce this requirement and the effectiveness of the codes in reducing flood-related damage to buildings and contents. (Sec. 135) GAO Feasibility Study on No similar provision. Would require GAO to submit a report to Congress on the Private Reinsurance feasibility of purchasing private reinsurance or retrocessionary coverage to underwrite primary private insurers for flood losses and the estimated potential total savings to the taxpayer of taking this action. (Sec. 133) WYO Insurer Expense No similar provision. Would require FEMA within 6 months of enactment to develop a process to collect expense information from WYO insurers and revise expense reimbursement process. GAO would receive data from the Administrator and report to Congress on the effectiveness of the new process. (Sec. 129) CRS-20 H.R. 3121 (Waters) S. 2284 Provision (Passed by House 9/27/07) (Passed by Senate 5/13/08) Miscellaneous Provision Strategic Petroleum No similar provision. Would suspend federal government petroleum acquisition for the Reserves Strategic Petroleum Reserves. (Sec. 302) Reimbursement of No similar provision. Would modify the project for flood control, Big Sioux River and Expenses in Flood Control Skunk Creek, Sioux Falls, South Dakota to authorize the Projects reimbursement of the non-federal share of project, only if additional federal funds are appropriated for that purpose. (Sec. 301) Source: Congressional Research Service examination of legislation. ------------------------------------------------------------------------------ For other versions of this document, see http://wikileaks.org/wiki/CRS-RL34367