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21st Century Flood Reform Act Set to Revamp Flood Insurance

By November 23, 2017June 9th, 2020Flood

On Tuesday, November 14, 2017 the US House of Representatives passed the 21st Century Flood Reform Act (HR 2874) with a whopping 237 to 189 vote. If passed by the Senate and the President, the bill would extend the National Flood Insurance Program (NFIP) for another 5 years. The NFIP, which saw another devastating year of flood claims, is set to expire on December 8th.

Our agent, Brian T. Ford, has read the entire bill and has provided us with his highlights below.

21st Century Flood Reform Act Highlights:

  • Extends the NFIP until September 30, 2022
  • Decreases the maximum annual premium rate increase from 18% to 15%
  • Provides flood insurance affordability programs for eligible low-income households
  • The administrator of the NFIP, the Federal Emergency Management Agency (FEMA), must disclose their premium methodologies & must hold public meetings
  • FEMA must come up with different rates for coastal and riverine (i.e. inland) flood risk
  • Adopt a monthly installment premium test program
  • Program must clearly communicate to policyholders their property’s flood risk, including a history of the flood claims at the property
  • Communities will voluntarily be allowed to purchase a policy to cover all residential & non-residential properties within the community
  • FEMA must make data on historical claims, required coverage, and previous damage available to the current owner of a property within 30 days of a request
  • States must require a seller or lessor to disclose to a new purchaser or lessee any previous flood damage or flood claims, and any obligation to purchase flood insurance
  • FEMA must study and develop an implementation plan for including replacement cost value of premium rates
  • Adds a premium cap of $10k for certain residential properties
  • Institutes premium mitigation credits for buildings that make efforts to flood proof their buildings
  • FEMA must review flood coverage for cooperative unit owners (at this time, cooperative unit owners CANNOT purchase building coverage, and can only use 10% of their contents limit for improvements and betterments)
  • Requires Federal agency lenders and Federal mortgage entities to accept private flood insurance
  • Government bodies including HUD, Fannie Mae, and Freddie Mac must develop requirements relating to the financial strength of private flood carriers
  • FEMA must consider any period during which a property was continuously covered by private flood insurance to be a period of continuous coverage
  • Write Your Own (WYO) companies (which currently write and sell NFIP policies) will be allowed to sell private flood insurance
  • FEMA must provide data related to NFIP risks, premiums, & claims to the public
  • Policyholders can receive mid-term refunds if they move from the NFIP to a private flood company
  • FEMA must study the practicality of flood damage savings accounts
  • FEMA must use risk assessment data and tools in determining rates (not just flood maps)
  • Changes the appeals process if a policyholder disagrees with an elevation determination or flood zone
  • Requires communities to develop plans for mitigating flood risk to continuously flooded properties
  • Allows for $60k in additional increased cost of compliance coverage for an additional surcharge ($30k is the max increased cost of compliance coverage available now)
  • FEMA must commission an annual independent actuarial review
  • Amends the HFIAA surcharge for certain properties.
    • Increases the amount of surcharge from $25 to $40 for primary residences
    • Decreases the surcharge from $250 to $125 for non-primary residences located outside of special flood hazard areas
    • Increases the surcharge from $250 to 275 for non-primary residences and non-residential properties
  • FEMA must institute a uniform rate of assessment for all policyholders if increasing premiums
  • Changes many rules for multiple loss & extreme repetitive loss properties, such as increasing of rates and minimum deductibles
  • Eliminates NFIP coverage for properties with excess lifetime claims
  • Reduces commissions paid to Write Your Own companies
  • Individuals can take out loans up to $25k without flood insurance (the maximum was $5k before)
  • State, local government, or private lenders may require flood insurance for a structure located outside a special flood hazard area
  • Policyholders must submit claims no later than 120 days after the flood event
  • GAO must study options for simplifying the NFIP
  • All peril policies (including fire, wind, & flood) will satisfy the mandatory purchase requirement
  • NFIP must transfer part of its risk to reinsurance or capital markets

A Long Road to Go in a Very Short Time

Although we have issues with certain intricacies of the 21st Century Flood Reform Act, our agents are happy that our government is making an effort to create a sustainable flood insurance program for the years to come. It’s currently sitting in the Senate Committee on Banking, Housing, & Urban Affairs. With the looming December 8th deadline we hope that our Senate leaders in Washington DC will make moves to tailor and pass the bill.

If you have any questions about flood insurance or the 21st Century Flood Reform Act, please reach out to Brian T. Ford, CPCU at 727-345-0242 or