Steve Scalise strikes deal with key congressman on National Flood Insurance Program’s future

Advocate, The (Baton Rouge, LA)

Nov. 04--WASHINGTON -- A deal on changes to the National Flood Insurance Program struck Friday between House Majority Whip Steve Scalise and House Financial Services Chairman Jeb Hensarling appears to resolve some key sticking points on a long-term reauthorization of the program.

The two Republican congressmen, who'd been at odds over key provisions for months, reached the agreement after weeks of closed-door meetings aimed at ironing out differences.

The compromise would prevent policyholders whose homes flooded multiple times in the past from being booted from the program, but would ratchet up rates for those who make multiple claims to the program in the future, according to three sources familiar with the negotiations.

Hensarling, of Texas, had pushed a number of provisions that Louisiana lawmakers worried would send premiums skyrocketing for those in flood-prone areas, including much of south Louisiana.

Hensarling's committee oversees the program and his bill would've hit policyholders whose homes had previously flooded -- so-called "multiple-loss properties" -- with significant premium increases or booted them from the federally run program altogether.

Those provisions raised hackles in Louisiana where thousands of homes have seen prior flood-insurance claims from hurricanes or floods. Significant hikes to NFIP premiums or loss of access to the program would have likely had a dramatic effect on home values.

Many homeowners in Louisiana enjoy NFIP premiums set lower than their property's rate based on its current risk of flooding and updated FEMA flood maps, thanks to a practice known as "grandfathering." Premiums instead are calculated based on flood risk at the time of construction.

Under the deal struck between Scalise, of Jefferson, and Hensarling, homeowners would see their rates rise from their grandfathered rates only after filing two future claims, sources said. Rates would then rise 10 percent per year, according to sources, until hitting the current risk-rate. A third claim would see rates ratchet up at 15 percent per year.

Hensarling's original bill would have counted all past NFIP claims -- including those filed by prior owners decades ago -- against a property's grandfathered status. It also would have raised rates on multiple-loss properties faster.

Homes that have flooded several times and received NFIP payouts equal to multiple times their value would still potentially lose NFIP coverage under the Scalise-Hensarling compromise. But sources said the threshold to be booted from the program would rise from double a home's value to three times -- and only future claims would count against that cap.

"Being from Louisiana and Texas, we are all-too familiar with the devastating effects of floods and the havoc they wreak on communities," Hensarling and Scalise said in a joint statement. "That's why we agree on the importance of a long-term reauthorization of the National Flood Insurance Program that helps both policyholders and taxpayers.

"The bill we support will begin to make the flood insurance program more stable and sustainable for the people who count on it," the pair added. "We look forward to bringing this legislation to the House soon and urge our colleagues to support it."

Deep divides between Scalise, who as the House's No. 3 Republican wields considerable power to hold up legislation, and Hensarling, whose committee controls the program, had created a standoff over the program's future.

Scalise's First Congressional District includes most of the New Orleans suburbs, parts of the city and large swaths of the Louisiana coast, all areas where residents depend on the federally run insurance program. Flood-insurance coverage is required to obtain mortgages on homes in flood-hazard areas.

Hensarling, meanwhile, has viewed the NFIP as fiscally unsustainable. Hensarling has argued that removing multiple-loss properties and hiking premiums on others to risk rates would shore up the program's finances.

Louisiana lawmakers, housing groups and other advocates, however, have warned that those changes would hit coastal and other flood-prone areas hard and leave families struggling with higher premiums and lower property values.

Louisiana's congressional delegation instead have generally pushed for changes to the NFIP that would bring more property owners into the program, creating a larger flow of premium dollars and widening the program's risk pool.

The text of the compromise bill hadn't been drafted Friday evening. It's expected to be released either Monday or Tuesday, ahead of a newly scheduled hearing in the House Rules Committee on the bill.

"The concessions secured by Whip Scalise give us a much stronger bill, and we commend him for his leadership to protect grandfathering and other critical issues," wrote Caitlin Berni, vice president of policy and communications for Greater New Orleans Inc., in a note to stakeholders in the national flood-insurance lobbying coalition her group helped organize. "We will work to address remaining concerns as the legislative process proceeds."

Several key areas of potential disagreement appeared to remain unresolved by the Scalise-Hensarling deal. Congress -- and the Louisiana delegation -- have been split over whether to allow private insurance companies to offer flood insurance policies and, if so, how to regulate the market.

Among the chief concerns with private flood insurance policies is that companies would cherry-pick which properties to cover, scooping up low-risk or lucrative policies and leaving the federally run program with only subsidized or high-risk policies.

Beginning with Hurricane Katrina, when extensive destruction in New Orleans and the Gulf Coast triggered record claims and wiped out the NFIP's savings, the program has been saddled with mounting debts to the U.S. Treasury. A series of destructive hurricanes so far this year brought billions more in claims, threatening the NFIP with insolvency and focusing attention on the program.

As part of an October package of emergency disaster relief funding, Congress forgave $16 billion of the NFIP's nearly $30 billion debt, freeing up cash to pay new claims and avoiding skyrocketing interest payments, which must be covered by NFIP policyholders.

It remained unclear Friday evening whether lawmakers in the U.S. Senate would get on board with the revised provisions from the Scalise-Hensarling bill or would forge ahead with their own proposals.

Several draft bills remain pending in the Senate, including separate proposals co-authored by Sens. John Kennedy, R-Madisonville, and Bill Cassidy, R-Baton Rouge.

Cassidy welcomed news of the deal in a statement late Friday afternoon but didn't immediately commit his support to the as-yet unwritten new draft.

"I thank Whip Scalise and Chairman Hensarling for making progress towards a comprehensive, long-term reauthorization of the National Flood Insurance Program," Cassidy said. "This is a step in the right direction."

The NFIP is set to expire on Dec. 8. Several people familiar with the negotiations expressed a mix of opinions about whether Congress might be able to strike a sweeping long-term deal on the program before that date.

If no deal is struck, Congress could either extend the program with a short-term reauthorization -- as lawmakers did just ahead of a previous Sept. 30 deadline -- or let it lapse, something that would put a hold on any new policies.

Brief prior lapses in the program have created headaches in the real estate markets as banks, which are federally mandated to require flood-insurance coverage on nearly all residential mortgages in flood zones, have delayed home sales.

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