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FEMA Chief Can’t Delay Flood Insurance Changes

Posted by Judith Sterling
Pax II

Craig Fugate, FEMA director

Craig Fugate, FEMA director

Many homeowners will be paying a lot more for flood insurance under newly designed FEMA flood maps, despite efforts by federal lawmakers to revise the new law.

Sen. David Vitter, (R-La.), a leader in the effort to block the rate hike, said that the flood insurance is not just a Louisiana issue, although his state may be first to be experiencing the higher process. “This is a national issue. This movie is coming to a theater near you,” Mr. Vitter warns.

“There is no provision for affordability in this law,” said Craig Fugate, director of the Federal Emergency Management Agency. Mr. Fugate explained to a Senate committee on economic policy, that he does not have the authority to delay or halt the law.

“I need help. I have not found a way to delay…without some additional legislative support. There is no provision for affordability in this law,” he told members of the economic policy subcommittee of the Senate Committee on Banking, Housing and Urban Affairs.

Nationwide Insurance’s Judith Sterling in Great Mills, Maryland, can help you assess where your home fits in the new maps.

FEMA officials hope the map changes will help stabilize the National Flood Insurance Program. The program currently allows some artificially low rates and discounts as a result of the size of federal subsidies. The new law would phase those out.

The Biggert Waters Act eliminates subsidies for properties with repetitive losses, on properties were mitigation steps are not taken and on second homes. The new law will also remove grandfather provisions holding down risk-based rates.

The NFIP collects more than $3.5 billion in annual premium revenue, and FEMA estimates that an additional $1.5 billion annually is needed from subsidized policyholders to balance the program financially, according to Insurance Journal.

According to FEMA, around 250,000 policyholders are seeing immediate increases due to changes in the law. But more than double that, 578,000 policyholders will retain the subsidies they currently receive until the home is sold of suffers repeated loss due to flood.

Most increases are being phased in over five years, with policyholders paying incrementally higher premiums each year.

“Each property’s risk is different. Some policyholders may reach their true risk rate after less than five years of increases, while other policyholder increases may go beyond five years to get to the full risk rate required by the new law,” Fugate said.


SOURCE: Insurance Journal

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