Summary of the Flood Insurance Reform Act
When an insured property owner suffers flood damage, he just wants his flood insurance to work like it's supposed to. The National Flood Insurance Program covers property owners for flood damage, but to ensure proper administration of the program and provide sufficient coverage for policyholders, different forms of the Flood Insurance Reform Act have been passed over the years to modify the original program.
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Flood Insurance Program
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A series of hurricanes in 1963, 1964 and 1965 caused areas of severe flooding in the United States. Congress responded to these natural disasters by establishing the National Flood Insurance Program in 1968. The program established three objectives: reduction of the nation's flood risk through flood plain management; improvement of flood hazard data and risk assessment by mapping the nation's flood plains and making affordable flood insurance widely available in communities that adopt and enforce measures that make future construction safer from flooding.
1994 Reform Act
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The National Flood Insurance Reform Act of 1994 was passed to strengthen the National Flood Insurance Program (NFIP). It established fines on mortgage lenders who don't enforce the purchase of flood insurance on properties in special flood hazard areas. Coverage limits were increased on policies and Increased Cost of Compliance coverage was instituted. A grant program was instituted to assist states and communities in developing measures to reduce future flood damage. The NFIP Community Rating System was established and FEMA was required to assess its flood hazard map inventory at least once every five years.
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2004 Reform Act
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The Flood Insurance Reform Act of 2004 established two tiers of repetitive loss properties, repetitive and severe repetitive. Repetitive properties incur two or more flood losses greater than $1,000 within any 10-year period. Severe repetitive properties incur four or more flood losses of at least $5,000 each, or at least two separate claims with the cumulative amount of the building payments exceeding the value of the structures on the property within any 10-year period. The act provides grants to states and communities to make improvements to these properties to reduce or eliminate future claims.
2010 Reform Act
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On July 16, 2010, the House approved a flood insurance reform bill designed to extend the National Flood Insurance Program through to September 30, 2015. The Flood Insurance Reform Priorities Act ensures that current policyholders will retain their coverage and that new policies can be written. Many communities require flood insurance to obtain a mortgage and the extension would strengthen the home sales in those areas. The bill would also make changes that would increase overall premium income. As of July 2010, the bill awaits Senate action.
Responsibility for Implementation
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The Federal Emergency Management Agency (FEMA) is charged with implementing the Flood Insurance Reform Act of 2004. FEMA has established three divisions to oversee programs to reduce future flooding. The Risk Analysis division identifies hazards and areas of weakness and determines how to manage them. Risk Reduction implements grant programs, identifies safe building practices and ensures compliance with the NFIP. The Risk Insurance division reduces flood losses by providing affordable insurance to homeowners. The Department of Homeland Security (DHS) has oversight over FEMA's implementation activities.
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References
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- Photo Credit kayaker in flood image by Karin Lau from Fotolia.com
