Mark Sanford HR 3370 Homeowner Flood Insurance Affordability Act

Mark Sanford
March 12, 2014

Over the last couple of months, I’ve been hearing a lot of concern from back home about the changes to flood insurance as a result of the Biggert-Waters Act of 2012. Given recent action on this front, I wanted to write and update you on what is happening.

Last week the House passed H.R. 3370, the Homeowner Flood Insurance Affordability Act, which I voted for and cosponsored. Similar legislation has already passed the Senate, so the next step will be to merge the House and Senate bills, in what is called a conference report, before it goes to the President. While we wait to see what that final bill looks like, I want to share several thoughts on what the House passed legislation does, and the way it impacts individuals who were hit with sudden cost increases from Biggert-Waters.

First, H.R. 3370 repeals the automatic insurance rate increase that comes with selling a property under Biggert-Waters. Basically Biggert-Waters said you couldn’t sell a home and maintain the current, or grandfathered, insurance rate, meaning buyers suddenly had to absorb the new full rate which in many cases was a 10 or 15 fold increase. H.R. 3370 fixes this problem by mandating that the insurance policy stays with the property, regardless of the homeowner. Many people have flagged this as a needed fix to me because the rate hikes at time of sale were scaring off homebuyers.

Second, this bill fixes the problem with Biggert-Waters where individuals would see premium increases based off flood maps that hadn’t yet been drawn. I ultimately decided to co-sponsor the Homeowner Flood Insurance Affordability Act because the Biggert-Waters legislation that passed last year, while well intended, was flawed in this regard. I wasn’t there during its passage, but in this case you had a bill that put the cart before the horse. It allowed government to set new premiums now and charge more without disclosure of how they were deriving their new rates.

The frequency and size of storms, and even details like whether or not they anticipate a high or low tide at landfall make for real differences in calculating hypothetical damage that go straight to impacting premiums that will be charged. As a conservative it seems reasonable to say why and how, when government just says ‘trust me,’ and the degree to which the original bill was flawed was highlighted by the fact that even Rep. Maxine Waters cosponsored this bill that amended her bill. A ‘time-out’ and delaying implementation of Biggert-Waters accordingly made sense to me.

H.R. 3370 instead uses current flood maps to gauge increases. This seems reasonable since they are the flood maps that now exist, and for primary residences premium increases are limited to between 5 and 18% per year. This change, which amounts to a delay, will allow individuals to see why and how their premium is being calculated and also gives them more time to adjust to their changing insurance premiums. For second homes and businesses the increases will be limited to 25% a year, again based on the current maps. Some I have talked to wish it was less, and to this I would say it is much less than the several hundred or thousand percent increases some folks were already seeing in flood insurance premiums.

Third, it refunds those policyholders who paid the increases from Biggert-Waters right off the bat. Those that bought a home and took on large premium increases will be refunded the difference between the higher amount they paid and the previous flood insurance rate. The same situation applies for people that kept their homes and chose to pay the higher rates to keep their coverage. Additionally, those who allowed their flood insurance policies to lapse will be able to pick them back up again at the previous rate.

Lastly, H.R. 3370 covers the costs of fixing Biggert-Waters, in comparison with the Senate version of the bill, which has no offset to pay for these changes. This means that taxpayers far from flood zones are not on the hook for a slower approach to reforming the National Flood Insurance Program in the way they would be with the Senate bill. The bill covers the cost by charging ratepayers a $25 yearly fee for primary residences and a $250 yearly fee for second homes and businesses. Concurrently, the increases in premiums are intended to help in moving the system to a rate that is closer to actuarially sound, and thereby not add to the National Flood Insurance Program’s $24 billion liability.

While change is certain to come for the flood insurance program, it needs to be done in a manner that gives markets and people the ability to respond and plan. As Governor, my administration worked to reform government so that it was less burdensome on the taxpayer, whether at the Department of Transportation, the Department of Motor Vehicles, the Department of Corrections or others, so I certainly hear and understand the voices of those calling for changes to the National Flood Insurance Program. But you can’t solve the problem overnight, especially when it involves considerable financial exposure for the individual who, through no fault of their own, has relied on promises government has made in the past. I think H.R. 3370 strikes a balance in the way it helps correct some of the unintended problems that have resulted from Biggert-Waters and still begins the process of reform.

Please forgive the long winded nature of this email, but given all I have heard from folks along the coast on this I wanted to relay what I have come to learn on this measure. I hope this information is helpful.


Mark Sanford

Paid for and authorized by the Beaufort County Republican Party.

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