H.R. 2874 — what changed

changed “(iii) the differences in flood risk for properties located in impacted by coastal areas flood risk and properties located inland; impacted by riverine, or inland flood risk; and”

added Paragraph (7) of section 102(b) of the Flood Disaster Protection Act of 1973 (42 U.S.C. 4012a(c)) is amended to read as follows:

added “(7) Definitions—In this section:

added “(A) Federal flood insurance—The term Federal flood insurance means an insurance policy made available under the National Flood Insurance Act of 1968 (42 U.S.C. 4001 et seq.).

added “(B) Flood insurance—The term flood insurance means—

added “(i) Federal flood insurance; and

added “(ii) private flood insurance.

added “(C) Mutual aid society—The term mutual aid society means an organization—

added “(i) the members of which—

added “(I) share a common set of ethical or religious beliefs; and

added “(II) in accordance with the beliefs described in subclause (I), agree to cover expenses arising from damage to property of the members of the organization, including damage caused by flooding; and

added “(ii) that has a demonstrated history of fulfilling the terms of agreements to cover expenses arising from damage to property of the members of the organization caused by flooding.

added “(D) Private flood insurance—The term private flood insurance means—

added “(i) an insurance policy that—

added “(I) is issued by an insurance company that is—

added “(aa) licensed, admitted, or otherwise approved to engage in the business of insurance in the State in which the insured building is located, by the insurance regulator of that State; or

added “(bb) eligible as a nonadmitted insurer to provide insurance in the home State of the insured, in accordance with sections 521 through 527 of the Nonadmitted and Reinsurance Reform Act of 2010 (15 U.S.C. 8201 through 8206);

added “(II) is issued by an insurance company that is not otherwise disapproved as a surplus lines insurer by the insurance regulator of the State in which the property to be insured is located; and

added “(III) provides flood insurance coverage that complies with the laws and regulations of that State; or

added “(ii) an agreement with a mutual aid society for such society to cover expenses arising from damage to property of the members of such society caused by flooding, unless the State in which the property to be insured is located has—

added “(I) determined that the specific mutual aid society may not provide such coverage or provide such coverage in such manner; or

added “(II) specifically provided through law or regulation that mutual aid societies may not provide such coverage or provide such coverage in such manner.

added “(E) State—The term State means any State of the United States, the District of Columbia, the Commonwealth of Puerto Rico, Guam, the Northern Mariana Islands, the Virgin Islands, and American Samoa.”

changed “(iii) “(iv) both the risk identified by the applicable flood insurance rate maps and by other risk assessment data and tools, including risk assessment models and scores from appropriate sources; and”

“(b) Amount—The amount of the surcharge under subsection (a) shall be $40, except as follows:

“(1) Non-primary residences eligible for PRP—The amount of the surcharge under subsection (a) shall be $125 in the case of in the case of a policy for any property that is—

“(A) a residential property that is not the primary residence of an individual, and

“(B) eligible for preferred risk rate method premiums.

“(2) Non-residential properties and non-primary residences not eligible for PRP—The amount of the surcharge under subsection (a) shall be $275 in case of in the case of a policy for any property that is—

“(A) a non-residential property; or

“(B) a residential property that is—

“(i) not the primary residence of an individual; and

“(ii) not eligible for preferred risk rate method premiums.”

“(d) Multiple-Loss properties

“(1) Definitions—As used in this title:

“(A) Multiple-loss property—The term “multiple-loss property” means any property that is a repetitive-loss property, a severe repetitive-loss property, or an extreme repetitive-loss property.

“(B) Repetitive-loss property—The term “repetitive-loss property” means a structure that has incurred flood damage for which two or more separate claims payments of any amount have been made under flood insurance coverage under this title.

“(C) Severe repetitive-loss property—The term “severe repetitive-loss property” means a structure that has incurred flood damage for which—

“(i) 4 or more separate claims payments have been made under flood insurance coverage under this title, with the amount of each such claim exceeding $5,000, and with the cumulative amount of such claims payments exceeding $20,000; or

“(ii) at least 2 separate claims payments have been made under flood insurance coverage under this title, with the cumulative amount of such claims payments exceeding the value of the structure.

“(D) Extreme repetitive-loss property—The term “extreme repetitive-loss property” means a structure that has incurred flood damage for which at least 2 separate claims have been made under flood insurance coverage under this title, with the cumulative amount of such claims payments exceeding 150 percent of the maximum coverage amount available for the structure.

“(2) Treatment of claims before compliance with State and local requirements—The Administrator shall not consider claims that occurred before a structure was made compliant with State and local floodplain management requirements for purposes of determining a structure’s status as a multiple-loss property.”

“(o) Premium adjustment To reflect current flood risk

“(1) In general—Except as provided in paragraph (2), the Administrator shall rate a multiple-loss property that is charged a risk premium rate estimated under section 1307(a)(1) (42 U.S.C. 4014(a)(1)) based on the current risk of flood reflected in the flood insurance rate map in effect at the time of rating.

“(2) Adjustment for existing policies—For policies for flood insurance under this title in force on the date of the enactment of this Act for properties described in paragraph (1)—

“(A) notwithstanding subsection (e) of this section, the Administrator shall increase risk premium rates by not less than 15 percent each year until such rates comply with paragraph (1) of this subsection; and

“(B) any rate increases required by paragraph (1) shall commence following a claim payment for flood loss under coverage made available this title that occurred after the date of enactment of this Act.”

“(B) in connection with a multiple-loss property.”

“(C) any extreme repetitive-loss property;”

changed “(F) any repetitive-loss property that has received a claim payment for flood loss under coverage made available under this title that occurred after the date of enactment of this Act; and”

“(5) the chargeable risk premium rates for flood insurance under this title for any properties described in subparagraph (F) of section 1307(a)(2) shall be increased by not less than 15 percent each year, until the average risk premium rate for such properties is equal to the average of the risk premium rates for properties estimated under section 1307(a)(1).”

“(3) Certain multiple-loss properties—Notwithstanding paragraph (1) or (2), the minimum annual deductible for damage to any severe repetitive-loss property or extreme repetitive-loss property shall be not less than $5,000.”

“1304A. Availability of insurance for multiple-loss properties

“(a) Date and information identifying current flood risk—The Administrator may provide flood insurance coverage under this title for a multiple-loss property only if the owner of the property submits to the Administrator such data and information necessary to determine such property’s current risk of flood, as determined by the Administrator, at the time of application for or renewal of such coverage.

“(b) Refusal To Mitigate

“(1) In general—Except as provided pursuant to paragraph (2), the Administrator may not make flood insurance coverage available under this title for any extreme repetitive-loss property for which a claim payment for flood loss was made under coverage made available under this title that occurred after the date of enactment of the 21st Century Flood Reform Act if the property owner refuses an offer of mitigation for the property under section 1366(a)(2) (42 U.S.C. 4104c(a)(2)).

“(2) Exceptions; appeals—The Director shall develop guidance to provide appropriate exceptions to the prohibition under paragraph (1) and to allow for appeals to such prohibition.”

“(i) Rates for properties newly mapped into areas with special flood hazards

“(1) In general—Except as provided in paragraph (2) and notwithstanding”

“(2) Inapplicability to multiple-loss properties—Paragraph (1) shall not apply to multiple-loss properties.”

changed “(2) Multiple-loss properties—Pursuant to paragraph (1), the Administrator shall clearly communicate to all policyholders for multiple-loss properties the effect on the premium rates charged for such a property of filing any further claims under a flood insurance policy with respect to that property”property.”

“(2) to property owners, in coordination with the State and community, in the form of direct grants under this section for carrying out mitigation activities that reduce flood damage to extreme repetitive-loss properties.”

“(3) Repetitive-loss property—In the case of mitigation activities to repetitive-loss properties, in an amount up to 100 percent of all eligible costs.”

“(h) Alignment with increased cost of compliance—Notwithstanding any provision of law, any funds appropriated for assistance under this title may be transferred to the National Flood Insurance Fund established under section 1310 (42 U.S.C. 4017) for the payment of claims to enable the Administrator to deliver grants under subsection (a)(2) of this section to align with the delivery of coverage for increased cost of compliance for extreme repetitive-loss properties.

“(i) Funding

changed “(1) Authorization of appropriations—There is authorized to be appropriated $225,000,000 for each fiscal year for flood mitigation appropriations—Notwithstanding any other provision of law, assistance grants.provided under this section shall be funded by—

added “(A) $225,000,000 in each fiscal year, subject to offsetting collections, through risk premium rates for flood insurance coverage under this title, and shall be available subject to section 1310(f);

added “(B) any penalties collected under section 102(f) the Flood Disaster Protect Act of 1973 (42 U.S.C. 4012a(f); and

added “(C) any amounts recaptured under subsection (e) of this section.

“(2) Availability—Amounts appropriated pursuant to this subsection for any fiscal year may remain available for obligation until expended.”

removed The National Flood Insurance Act of 1968 is amended—

“(f) Reducing future risks of the National Flood Insurance Fund

“(1) Prohibition of new coverage for high-risk properties—Except as provided in subsection (g) and notwithstanding any other provision of this title, in carrying out the fiduciary responsibility to the National Flood Insurance Program under section 1309(e) (42 U.S.C. 4016(e)) and to reduce future risks to the National Flood Insurance Fund, on or after January 1, 2021, the Administrator may not make available flood insurance coverage under this title as follows:

“(A) New structures added to flood hazard zones—Any new coverage for any property for which new construction is commenced on or after such date and that, upon completion of such construction, is located in an area having special flood hazards.

added “(B) Structures with high-value replacement costs—Any new or renewed coverage for any residential property having 4 or fewer residences and a replacement value of the structure, at the time, exclusive of the value of the real estate on which the structure is located, that is equal to or exceeds the amount that is equal to $1,000,000 multiplied by the number of dwelling units in the structure (as such amount is adjusted pursuant to clause (i)), subject to the following provisions:

removed “(B) Structures with high-value replacement costs—Any new or renewed coverage for any residential property having 4 or fewer residences and a replacement value of the structure, at the time, exclusive of the value of the real estate on which the structure is located, of $1,000,000 or more (as such amount is adjusted pursuant to clause (i)), subject to the following provisions:

“(i) Adjustment of amounts—The dollar amount in the matter of this subparagraph that precedes this clause (as it may have been previously adjusted) shall be adjusted for inflation by the Administrator upon the expiration of the 5-year period beginning upon the enactment of this subsection and upon the expiration of each successive 5-year period thereafter, in accordance with an inflationary index selected by the Administrator.

“(ii) Valuation—The Administrator shall determine the replacement value of a property for purposes of this subparagraph using such valuation methods or indicia as the Administrator determines are reasonably accurate, consistent, reliable, and available for such purposes.

“(2) Actuarial structures with hidden risks—For any property with risk premium rates estimated under section 1307(a)(1), on or after January 1, 2021, the Administrator shall charge risk premium rates based on the current risk of flood reflected in the flood insurance rate map or comparable risk rating metric in effect at the time a policy is newly issued, unless the newly issued policy covers a property with continuous flood insurance coverage under this title, or upon the renewal of a policy. For all such policy renewals, the Administrator shall increase the risk premium rate in accordance with section 1308(e)(2) until the risk premium rate is equal to the risk of flood reflected in the flood insurance rate map or comparable risk rating metric in effect at the time of renewal.

“(3) Implementation—The Administrator may implement this subsection without rulemaking, except that any such implementation shall include advance publication of notice in the Federal Register or advance notice by another comparable method, such as posting on an official website of the Administrator.

added “(g) Availability of otherwise prohibited flood insurance coverage where private market coverage is unavailable

added “(1) In general—The Administrator may make available flood insurance coverage under this Act for a property described in subparagraph (A) or (B) of subsection (f)(1), notwithstanding subsection (f) of this section, if, within the 30-day period beginning upon submission to the Clearinghouse established pursuant to section 1350 of an application for flood insurance coverage for such property, the Clearinghouse does not provide the applicant with one or more bona fide offers for private flood insurance coverage for such property.

added “(2) Surcharge—Any flood insurance coverage made available for a property pursuant to this subsection shall be made available at chargeable premium rates otherwise determined under this title for such property, except that the Administrator shall impose and collect a surcharge for such coverage in an amount equal to 10 percent of such chargeable premium rate, which shall be deposited into the National Flood Insurance Fund established under section 1310.”

removed “(g) Availability of otherwise prohibited flood insurance during counter-Cyclical market adjustment

removed “(1) Authority—Upon the effectiveness of a determination under paragraph (2) with respect to a geographical area, the Administrator may temporarily make available, for properties that are described in subparagraph (A) or (B), or both, of subsection (f)(1), and are located in such area, coverage for flood insurance under such Act, notwithstanding subsection (f), during the period that begins upon such determination and ends upon the termination date with respect to such period determined under paragraph (7) of this subsection.

removed “(2) Determination of market contraction—A determination under this paragraph for a geographical area is a determination, made by the State insurance regulator for the affected geographical area, that the availability or affordability of private flood insurance coverage in the United States for properties that are described in subparagraph (A) or (B), or both, of subsection (f)(1) and are located in such area has contracted significantly, made in accordance with the following requirements:

removed “(A) The State insurance coordinator has determined that there is no evidence that the State regulatory or legislative structure has unduly hindered the ability of private insurance carriers to compete in the State.

removed “(B) The State insurance coordinator has determined that there is evidence of a low market penetration of private flood insurance in the State, or a geographic area of the State, where private insurance carriers have been allowed to participate in the market in a fair process.

removed “(C) The State insurance coordinator has determined that private insurers have been given an opportunity to offer flood insurance but have failed to penetrate the markets by more than 10 percent of the market share for flood insurance.

removed “(D) The determination under this paragraph was made after the State insurance commissioner provided private insurance carriers and consumers an opportunity to provide information regarding the determination under this paragraph, which included holding a public hearing regarding such determination at which to provide such information that was held not less than 45 days after public notice of the time and place of such hearing was first made available.

removed “(E) The Secretary of the Treasury has confirmed the determination under this paragraph based on the conditions of the insurance market for such determination, including the geographic area subject to the determination.

removed “(3) Effective date—A determination under paragraph (2) shall take effect for purposes of paragraph (1) upon receipt by the Administrator of written notice of such determination, in accordance with such requirements as the Administrator shall establish.

removed “(4) Surcharge—Any flood insurance coverage made available for a property pursuant to this subsection shall be made available at chargeable premium rates otherwise determined under this title for such property, notwithstanding subsection (f), except that the Administrator shall impose and collect a surcharge for such coverage in an amount equal to 10 percent of such chargeable premium rate, which shall be deposited into the National Flood Insurance Fund established under section 1310.

removed “(5) Conditions for termination—Upon making a determination under paragraph (2), the Administrator shall also identify measurable criteria for determining when the conditions determined under paragraph (2) have ceased to exist for the affected geographical area.

removed “(6) Notice to Congress—Upon making a determination under paragraph (2), the Administrator shall provide, to the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate, written notice of such determination, the geographical area to which such determination applies, and the specific measurable criteria identified pursuant to paragraph (5).

removed “(7) Termination—The authority to make direct flood insurance coverage available pursuant to this subsection shall terminate upon the earlier of—

removed “(A) the expiration of the 12-month period beginning upon the date that notice under paragraph (6) is provided to the specified Committees; or

removed “(B) the occurrence of the conditions identified pursuant to paragraph (5).

removed “(8) Rules of construction

removed “(A) Multiple determinations—Nothing in this subsection may be construed to prevent multiple or consecutive periods during which direct flood insurance coverage may be made available pursuant to this subsection for properties referred to in subsection (f)(1).

removed “(B) Effectiveness of policies—The termination pursuant to paragraph (7) of authority to make direct flood insurance coverage available pursuant to this subsection may not be construed to affect the effectiveness or term of coverage of any policy for such coverage purchased pursuant to such authority.”

added “1350. Flood insurance clearinghouse

added “(a) Establishment and operations—Not later than January 1, 2021, the Administrator shall establish and commence operations of a Flood Insurance Clearinghouse (in this section referred to as the “Clearinghouse)” in accordance with the report, plan, and guidelines required under section 506(b)(2) of the 21st Century Flood Reform Act.

added “(b) Purpose—The Clearinghouse shall be established for the purpose of receiving applications from prospective insureds for flood insurance coverage for properties for which such coverage is prohibited under section 1305(f) of the National Flood Insurance Act of 1968 (42 U.S.C. 4012(f)) and for providing to such applicants offers for such coverage from insurers providing private flood insurance (as such term is defined for purposes of section 102(c) of the Flood Disaster Protection Act of 1973 (42 U.S.C. 4012a(c)) and, subject to the limitations in this section, for coverage made available under the National Flood Insurance Program.

added “(c) Functions—The Clearinghouse shall have as its functions—

added “(1) to provide for prospective insureds to submit to the Clearinghouse applications for flood insurance coverage for properties described in subsection (b);

added “(2) to determine, with respect to a property identified in an application, the chargeable premium rate for coverage made available under this title;

added “(3) with respect to a property identified in an application, to solicit offers of coverage under private flood insurance from providers of such insurance during a reasonable period of time after such application, which offers shall provide terms and conditions of insurance, including deductibles and exclusions, that are sufficient to meet the requirements of section 102 of the Flood Disaster Protection Act of 1973 (42 U.S.C. 4012a); and

added “(4) to provide to the applicant for insurance—

added “(A) any bona fide offers for private insurance coverage made pursuant to paragraph (3) for the property identified in the application;

added “(B) in the case only of a property for which such coverage is authorized pursuant to subsection (g) of section 1305, a bona fide offer for flood insurance coverage made available under this title for the property; and

added “(C) information to help the applicant for insurance understand such offers and the limitation under section 1305(g);

added “(d) Management and operation—The Clearinghouse shall be managed and operated by a third party pursuant to a contract with the Administrator.

added “(e) Agreements—The Administrator may enter into such agreements with insurers providing private flood insurance coverage as may be necessary for the Clearinghouse to carry out its functions.

added “(f) Fees—The Clearinghouse may charge a fee to applicants to cover administrative costs of the Clearinghouse.

added “(g) Reports—The Clearinghouse shall report periodically, as determined by the Administrator, to the Administrator regarding the operations and activities of the Clearinghouse.”

changed Section 1345 of the National Flood Insurance Act of 1968 (42 U.S.C. 4081), as amended by the preceding provisions of this Act, is further amended by adding at the end the following new subsection:

changed “(g) Allowance for Write Your Own companies—The allowance paid to companies participating in the Write Your Own Program (as such term is defined in section 1370 (42 U.S.C. 4121)) with respect to a policy for flood insurance coverage made available under this title shall not be greater than 25 percent of the chargeable premium for such coverage.”and program savings

added “(1) Allowance rate

added “(A) Limitation—The allowance paid to companies participating in the Write Your Own Program (as such term is defined in section 1370 (42 U.S.C. 4004)) with respect to a policy for flood insurance coverage made available under this title shall not be greater than 27.9 percent of the chargeable premium for such coverage.

added “(B) Inapplicability—Subparagraph (A) shall not apply to actual and necessary costs related to section 1312(a) (42 U.S.C, 4019(a)), or to payments deemed necessary by the Administrator.

added “(C) Implementation—The limitation in subparagraph (A) shall be imposed by equal reductions over the 3-year period beginning on the date of the enactment of this subsection.

added “(2) Program savings

added “(A) Implementation—The Administrator, within three years of the date of the enactment of this Act, shall reduce the costs and unnecessary burdens for the companies participating in the Write Your Own program by at least half of the amount by which the limitation under paragraph (1)(A) reduced costs compared to the costs as of the date of the enactment of this subsection.

added “(B) Consideration of savings—In meeting the requirement of subparagraph (A), the Administrator shall consider savings including—

added “(i) indirect payments by the Administrator of premium;

added “(ii) eliminating unnecessary communications requirements;

added “(iii) reducing the frequency of National Flood Insurance Program changes;

added “(iv) simplifying the flood rating system; and

added “(v) other ways of streamlining the Program to reduce costs while maintaining customer service and distribution.”

Section 102 of the Flood Disaster Protection Act of 1973 (42 U.S.C. 4012a) is amended—

changed “(i) Satisfaction of mandatory purchase requirement in States requiring flood coverage in all-Perils allowing all-perils policies

changed “(1) Waivers—Subsections (a), (b), and (e) of section Waivers—Section 102 shall not apply with respect to residential properties in any State for which the Administrator determines that State law, including any regulation or Executive order, requires that with respect residential properties allows any property insurance coverage that covers all perils “all-perils” except specifically excluded perils shall include that includes coverage for flood perils in an amount at least equal to the outstanding principal balance of the loan or the maximum limit of flood insurance coverage made available under this title with respect to such type of residential property, whichever is less.

“(2) Definitions, procedures, standards—The Administrator may establish such definitions, procedures, and standards as the Administrator considers necessary for making determinations under paragraph (1).”