Senators Seeking Flood Insurance Vouchers
"Americans deserve a flood insurance program that is sustainable for taxpayers, affordable for homeowners and accountable to everyone."
Sen. Bob Menendez
A bipartisan group of senators proposed Tuesday to overhaul the National Flood Insurance Program by capping premium increases, using advanced radar to make more accurate flood maps, and offering some homeowners vouchers to pay for coverage and loans to elevate buildings.
The bill, sponsored by senators on two key committees and from states that rely heavily on the program, is one of several proposals pending this year for revising rules for insurance purchased to cover 5 million homes and businesses, including 230,000 in New Jersey. A House committee is scheduled Wednesday to consider seven bills addressing different aspects of the program.
"Americans deserve a flood insurance program that is sustainable for taxpayers, affordable for homeowners and accountable to everyone," Sen. Bob Menendez, D-N.J., said at a news conference where he was joined by Louisana Republican Sen. John Kennedy and Maryland Democratic Sen. Chris Van Hollen.
The flood program was intended to be self-sustaining but ran up $25 billion in debts that it cannot repay in responding to catastrophic storms, including Hurricane Katrina in 2005 and Superstorm Sandy in 2012. The legal authorization for the Federal Emergency Management Agency to sell coverage expires on Sept. 30, and home sales in flood plains would be disrupted if Congress does not act.
Other sponsors of the bill are Republicans Thad Cochran of Mississippi and Marco Rubio of Florida and Democrats Cory Booker of New Jersey, Bill Nelson of Florida and Elizabeth Warren of Massachusetts.
Their bill would cap annual premium increases at 10 percent, compared with the 25 percent maximum allowed in a 2014 law. Families whose insurance costs exceed a percentage of their income set in the bill would be eligible for vouchers, and the bill also would provide low- or no-interest loans for work such as home elevation that would mitigate the impact of future floods.
"This bill's about affordability," Kennedy said. "It doesn't do any good to offer somebody insurance if they can't afford it."
To pay for the bill's new benefits, it would cap at 22 percent the commissions paid to insurance companies that sell and service policies but take no risk on coverage. About 31 percent of the premium dollars go to such payments now.
The bill also would suspend the practice of FEMA paying $400 million annually to the federal treasury as interest for loans for past disaster response.
"Beyond the insanity of having the federal government charge itself interest, we're robbing Peter to pay Paul," Menendez said.
Menendez and Kennedy also said the bill builds on the experiences of victims of past storms, taking aim at contractors who intentionally pay policyholders less than they are due and law firms that prolong appeals to increase billable hours.
"There's some really bad actors," Kennedy said. "Lawyers, engineers and others. This bill is going to give the head of FEMA the authority to call them up and say, 'You're fired.' "
Reps. Bill Pascrell Jr. of Paterson and Frank Pallone of Monmouth County said they would introduce an identical bill in the House.
"After seeing the devastation of Superstorm Sandy and all the challenges New Jerseyans faced in its aftermath, I know that getting the reauthorization of the National Flood Insurance Program right is a crucial aspect of preparing for a future storm," Pascrell said.
The bill does not take steps to encourage more private insurers to get more involved in the market, a goal of several other plans being considered in the House Financial Services Committee and a feature of a bill proposed earlier this year by Louisiana's other Republican senator, Bill Cassidy, with New York Democratic Sen. Kirsten Gillibrand.
The Cassidy-GIllibrand bill lays out a plan to transition the government program to more private-sector competition while also attempting to prevent private companies from cherry-picking the best risks and leaving FEMA to cover only properties most likely to flood.
The Cassidy-Gillibrand bill would also renew the flood program for 10 years, while the Menendez-Kennedy bill would provide a six-year extension.
"I decided to do my own bill, but I'm very supportive of Bill's efforts," Kennedy said of Cassidy, his Louisiana colleague.
Menendez, Kennedy, Warren and Van Hollen all serve on the Senate's Banking Committee, which is responsible for writing the new bill; Cochran is chairman of the Appropriations Committee, which funds disaster relief, and Rubio and Kennedy are members of the committee.
Cochran's sponsorship is significant, because the bill appears to directly repudiate provisions in President Donald Trump's proposed budget that called for steep increases in flood policy surcharges and elimination of funding for mapping and elevation.
House Republicans have been pushing for tighter financial controls, more private competition and other measures such as having FEMA purchase reinsurance on the commercial market. At a hearing last week, Financial Services Committee Chairman Jeb Hensarling, R-Texas, said the 96 percent of households that are not in flood zones should not be required to subsidize the 4 percent that are.
He took aim at policies that received subsidized premiums, a practice designed to encourage property owners to buy coverage. Hensarling said rates need to move closer to the actuarial risk of flooding that properties face. Critics say that could lead people to abandon homes or go without coverage, which could mean taxpayer funds would be provided through disaster relief in the event of flooding.
"Americans deserve a flood insurance program that is sustainable for taxpayers, affordable for homeowners and accountable to everyone."
Sen. Bob Menendez
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