Five flood insurance bills clear Financial Services Committee

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WASHINGTON — The House Financial Services Committee approved several bills Thursday designed to boost the private flood insurance market.

One bill (HR 2246) would allow commercial firms and small businesses to opt out of buying policies from the National Flood Insurance Program.

"NFIP policies will remain available to all businesses," said the bill's sponsor, Rep. Blaine Luetkemeyer, R-Mo. "Businesses operating in flood plains should have flood insurance coverage and I'm confident that lenders will insist on upon reasonable coverage for the underlying asset," he said during Thursday's committee markup session.

"It allows banks and other businesses more flexibility to secure private insurance coverage," Luetkemeyer said. His bill was approved by a 36-24 vote.

Rep. Maxine Waters, D-Calif., voted against the Luetkemeyer amendment, claiming community bankers oppose it "because they need to protect the loans they make to businesses."

However, the American Bankers Association supports the Luetkemeyer amendment. "This legislation would repeal the mandatory purchase requirement for commercial properties located in a special flood hazard area, while allowing commercial property owners the option of purchasing a NFIP policy," ABA Executive Vice President James Ballentine said in a June 13 letter to the committee. "The legislation would also enable NFIP to engage in risk transfer arrangements to lay off some of the risk borne by the NFIP to the private sector."

The Independent Community Bankers of America could not be reached for comment.

Another amendment would require the Federal Emergency Management Agency to conduct a study to evaluate whether the NFIP should use replacement costs to determining flood premiums, rather than area property values. Currently, FEMA premium rates seem to subsidize more expensive homes and at the expense of lower-value properties.

"This is about leveling the playing field and ensuring policyholders pay a fair rate that takes into account the value of their individual structure, which is commonplace in the private market," Luetkemeyer said at the markup session. This bill was approved by a 34-25 vote.

To reduce flood insurance losses, the committee also took aim at properties that are repeatedly flooded and file for claims. HR 1558 would require communities with more than 50 severe repetitive loss structures to develop community plans to address these problems. Failure to adequately address these issues could lead to sanctions by the FEMA administrator or even suspension from the National Flood Insurance Program.

"These reform bills will benefit all Americans because they will invite private-sector competition and lead to a sustainable flood insurance program — sustainable for homeowners, small-business owners, residential and commercial real estate markets, and sustainable for hardworking taxpayers," said Jeb Hensarling, R-Texas, who chairs the House Financial Services Committee.

Meanwhile, supporters of flood insurance reform are pleased that the House is moving quickly on flood insurance reform. The flood program is slated to expire at the end of September and that can cause of lot of disruption in the real estate market.

"Having the committee moving this forward really jump-starts the legislative process and hopefully the Senate will follow suit pretty quickly," said Steve Ellis, vice president of Taxpayers for Common Sense, which is a member of the SmarterSafer coalition.

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Flood insurance Law and regulation Risk management Homeowners insurance Maxine Waters Jeb Hensarling