Today, Congress passed the “Biggert-Waters Flood Insurance Reform and Modernization Act of 2012,” which extends the National Flood Insurance Program (NFIP) for five years and makes reforms to the program. The reauthorization was included in a compromise deal that included the surface transportation reauthorization and the student loan bill. The House passed the measure early in the afternoon on a 373-52 vote. The Senate then passed the bill on vote of 74-19.

The NFIP has been caught in a cycle of short-term extensions and subsequent lapses since 2008, expiring four times in 2010 alone. The original bill was seen as failing to give proper credit to federal, state and local investments in levees and other flood control infrastructure. The proposal approved by the Banking Committee would have imposed land-use restrictions and mandated the purchase of insurance for all areas protected by a levee, including areas in the 500-year floodplain for a 500-year levee.

The reforms in the extension include phasing out subsidies for many properties, raising the cap on annual premium increases from 10 to 20 percent, allowing multifamily properties to purchase NFIP policies, imposing minimum deductibles for flood claims, requiring the NFIP administrator to develop a plan for repaying the debt incurred from Hurricane Katrina, and establishing a technical mapping advisory council to deal with map modernization issues. The legislation would also require the Government Accountability Office (GAO) to conduct a study on the prospect of adding business interruption and additional living expenses coverages to the NFIP and would require the Federal Insurance Office (FIO) to study and submit a report to Congress on natural disaster insurance issues and possible legislative solutions.

The American Insurance Association (AIA), Property Casualty Insurers Association of America (PCI) and The Independent Insurance Agents & Brokers of America (IIABA) applauded the passing.

“Congress recognized that reforms including movement toward fiscal soundness by eliminating premium subsidies, and moving toward risk-based pricing are necessary for the long-term stability of the program,” said Tom Santos, VP for federal affairs at AIA. “These reforms make significant progress toward protecting consumers and taxpayers, and improving the NFIP.”

The NFIP was set to expire on July 31, 2012, in the midst of hurricane season. “This was a critical time for Congress to pass a long-term solution for the flood program as communities across the State of Florida recover from the devastating aftermath of Tropical Storm Debby,” said Ben McKay, SVP of federal government relations for PCI. “We urge President Obama to sign this measure as soon as possible.”

IIABA contends the implementation of the many provisions will help put the program on more solid financial footing. “Both the House and Senate should be commended,” said Charles Symington, IIABA SVP of government affairs. “We are very proud today that Congress has finally passed this balanced, bipartisan bill that will provide long-term protection for both consumers and taxpayers.”

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