Congressman Steven Palazzo (R-MS) released the following statement today after introducing legislation that would provide immediate relief for rising flood insurance rates while keeping the National Flood Insurance Program solvent for future disasters. The package would freeze all rate hikes for one year and slow the growth of rate increases to flood insurance policies over the next ten years.
"Some homeowners and small businesses on the Gulf Coast are facing a lot of uncertainty right now as a result of new increases scheduled to take effect over the next two years," Palazzo stated. "I absolutely believe we must make changes to keep NFIP solvent --- people need access to affordable insurance. What I disagree with is the severe and unfair way these rates are increased over the next few years under current law. The financial strain on families, small businesses, and new homebuyers could ultimately affect South Mississippi's economy. Many have already spent a lot of time, sweat and money rebuilding their lives after Hurricane Katrina. We have to get ahead of this now if we want to keep affordable insurance available for Mississippians."
Under the Biggert-Waters Flood Insurance Reform Act of 2012, the maximum rate increase the National Flood Insurance Program (NFIP) could impose in a given year was raised from 10% to 20%, and in some cases up to 25%. For those selling their home, rates would be significantly and immediately increased to get homes to the actuarially sound rate. This was done as an attempt to bring the heavily indebted program back to solvency over time. Palazzo's legislation would slow down rate increases over the next 10 years, while keeping NFIP solvent by phasing out insurance subsidies at a more affordable rate over time. A second bill would offer flood mitigation tax credits of up to $5,000 for homeowners and small businesses, as well as grant funding to NFIP policy holders who mitigate against future flood risk.
The chart illustrates the difference in projected rate increases for a homeowner currently paying $500 per year in NFIP premiums. Under current law, the homeowner could pay $1,220 after five years, while under Palazzo's legislation, the same homeowner could pay only $665 in the fifth year. Additionally, under current law, a homebuyer would immediately pay the unsubsidized rate determined by FEMA. Palazzo's bill would reinstate the moderate growth rate after a home sale.
The week of March 18-22 is National Flood Safety Awareness Week.