8 | DECEMBER 2017 | Claims Magazine |
The 21st Century Flood
Reform Act: What’s in it?
By Christine G. Barlow, CPCU, FC&S
On Nov. 14, the U.S House of Repre- sentatives passed the 21st Century Flood Reform Act (H.R. 2874) to
address the issue of the cost of repeatedly
flooded properties draining the National
Flood Insurance Program (NFIP), which
is already in significant debt.
There are five sections to the bill and
here are the highlights of each section:
This section limits annual premium increases to 15% and annual increases will
be no less than 5%. Much of the NFIP’s
financial issues arise from inadequate
premiums. The bill authorizes an afford-ability program to provide financial assistance to those with incomes below 150%
of the poverty level for the state through
a state program.
The state will verify income, rate
increases will be limited on eligible
households, and a surcharge will be ap-
plied to each flood policy to help pay for
this assistance to eligible households.
Monthly installment payments will now
be acceptable, and policyholders will be
advised of their full flood risk determinations and the actuarial soundness of
Upon transfer of property, the flood
risk information for the property must be
disclosed to the purchaser after Sept. 30,
2022. Otherwise, no new flood coverage
may be provided.
choice through private
The Write Your Own Program will no
longer contain a non-compete clause,
thus allowing insurers, agents, brokers
and others to offer and sell private flood
insurance. ISO has already developed
commercial and personal flood programs that are currently being filed with
Information accumulated by the
NFIP related to risks of flooding on in-
dividual properties, loss ratios, current
and historical claims information, iden-
tification of mitigation efforts or lack
thereof will be made public through an
open-source data system. A publically
searchable database of community in-
formation will be established no later
than 12 months after the enactment of
Cancellation of a policy due to replacement with another flood policy will
generate a refund of unearned premium.
The cancellation will be effective the date
the new policy is effective. Definitions of
the terms federal flood insurance, flood
insurance, mutual aid society, private
flood insurance and state are provided
in the bill.
The establishment of flood damage
savings accounts will be allowed once
reviewed and determined to be feasible.
A flood damage savings account is an account established by the owner of a property and the proceeds are available only to
cover losses from flooding.
Risk assessment data and tools to identify
flood areas will be identified and used. The
state, local government or owners of property may appeal a denial of a request to up-