House legislation would bar FEMA from preventing flood insurance policyholders

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If passed, new legislation from United States Reps. Blaine Luetkemeyer (R-MO) and Kathy Castor (D-FL) would block the Federal Emergency Management Agency (FEMA) from preventing flood insurance choice and locking consumers into the National Flood Insurance Program (NFIP).

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The Biggert-Waters Flood Insurance Reform Act of 2012 was enacted to reform the NFIP to require, among other things, that federal lending institutions be satisfied by certain non-NFIP insurance policies for its mandatory purchase requirement. The NFIP itself is meant to bear some of the risk of flood losses through flood insurance administered by the government and to reduce flood damages through restrictions on floodplain development. It requires all loans or lines of credit secured by existing buildings in such at-risk areas to have flood insurance.

“American consumers should have the right to decide what flood insurance policy best fits their specific needs, whether it be an NFIP or private sector policy,” Luetkemeyer said. “Penalizing policyholders who have maintained continuous flood coverage just because they explored options in the private market is nonsensical and only deters families from finding more affordable options.”

Florida is a state that faces endemic flooding, not in small part due to its numerous hurricanes. Together with Texas, it makes up the bulk of NFIP participants. As such, Castor pitched the revision to the law as a matter of financial stability and reducing confusion while spurring competition.

“This bipartisan legislation is an important step towards providing consumers an alternative to the National Flood Insurance Program without penalty,” Castor said. “Competition can bring lower prices and broaden the insurance pool to help reduce flood insurance rates that threaten hardworking families and small businesses. As we look towards another active hurricane season, I’m glad to work with my colleague Representative Luetkemeyer to ease cost burdens on hardworking Americans and increase consumer choice in continuous flood insurance coverage.”

The effort has been backed by organizations such as the Reinsurance Association of America, the Council of Insurance Agents & Brokers, and the American Property Casualty Insurance Association.

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