Calendar No. 498
109th CONGRESS
2d Session
S. 3589
[Report No. 109-271]
To amend the National Flood Insurance Act of 1968, to restore the
financial solvency of the flood insurance fund, and for other purposes.
IN THE SENATE OF THE UNITED STATES
June 28, 2006
Mr. SHELBY, from the Committee on Banking, Housing, and Urban Affairs reported
the following original bill; which was read twice and placed on the calendar
A BILL
To amend the National Flood Insurance Act of 1968, to restore the
financial solvency of the flood insurance fund, and for other purposes.
Be it enacted by the Senate and House of Representatives of the United
States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) Short Title- This Act may be cited as the `Flood Insurance Reform and
Modernization Act of 2006'.
(b) Table of Contents- The table of contents for this Act is as follows:
Sec. 1. Short title; Table of contents.
Sec. 4. Reform of premium rate structure.
Sec. 5. Mandatory coverage areas.
Sec. 6. Premium adjustment.
Sec. 7. State chartered financial institutions.
Sec. 9. Escrow of flood insurance payments.
Sec. 10. Financing of funds from the Treasury.
Sec. 11. Borrowing authority debt forgiveness.
Sec. 12. Minimum deductibles for claims under the National Flood Insurance
Program.
Sec. 13. Considerations in determining chargeable premium rates.
Sec. 15. Repayment plan for borrowing authority.
Sec. 16. Technical Mapping Advisory Council.
Sec. 17. National Flood Mapping Program.
Sec. 18. Removal of limitation on State contributions for updating flood
maps.
Sec. 19. Nonmandatory participation.
Sec. 20. Notice of flood insurance availability under RESPA.
Sec. 21. Testing of new floodproofing technologies.
Sec. 22. Participation in State disaster claims mediation programs.
Sec. 23. Reiteration of FEMA responsibilities under the 2004 Reform Act.
Sec. 24. Studies, Audits, and Reports.
SEC. 2. FINDINGS.
(1) the flood insurance claims resulting from the hurricane season of
2005 will likely exceed all previous claims paid by the National Flood
Insurance Program;
(2) the continuation of subsidized premium rates undermines the financial
solvency of the National Flood Insurance Fund;
(3) the presence of subsidized premium rates encourages families to continue
residing in high risk areas, often without appropriate mitigation activities;
(4) substantial flooding occurs outside of existing special flood hazard
areas;
(5) recent events throughout the country involving areas behind man-made
structures, known as `residual risk' areas, have produced catastrophic
losses;
(6) although such man-made structures produce an added element of safety
and therefore lessen the probability that a disaster will occur, they
are nevertheless susceptible to catastrophic loss, even though such areas
at one time were not included within the 100-year floodplain; and
(7) voluntary participation in the National Flood Insurance Program has
been minimal and many families residing outside the 100-year floodplain
remain unaware of the potential risk to their lives and property.
SEC. 3. DEFINITIONS.
(a) In General- In this Act, the following definitions shall apply:
(1) NATIONAL FLOOD INSURANCE PROGRAM- The term `National Flood Insurance
Program' means the program established under the National Flood Insurance
Act of 1968 (42 U.S.C. 4011 et seq.).
(2) 100-year FLOODPLAIN- The term `100-year floodplain' means that area
which is subject to inundation from a flood having a 1 percent chance
of being equaled or exceeded in any given year.
(3) 500-year FLOODPLAIN- The term `500-year floodplain' means that area
which is subject to inundation from a flood having a 0.2 percent chance
of being equaled or exceeded in any given year.
(4) WRITE YOUR OWN- The term `Write Your Own' means the cooperative undertaking
between the insurance industry and the Flood Insurance Administration
which allows participating property and casualty insurance companies to
write and service standard flood insurance policies.
(b) Common Terminology- Except as otherwise provided in this Act, any terms
used in this Act shall have the meaning given to such terms under section
1370 of the National Flood Insurance Act of 1968 (42 U.S.C. 4121).
SEC. 4. REFORM OF PREMIUM RATE STRUCTURE.
(a) To Exclude Certain Properties From Receiving Subsidized Premium Rates-
(1) IN GENERAL- Section 1307 of the National Flood Insurance Act of 1968
(42 U.S.C. 4014) is amended--
(i) in paragraph (2), by striking `; and' and inserting a semicolon;
(ii) in paragraph (3), by striking the period at the end and inserting
`; and'; and
(iii) by adding at the end the following:
`(4) the exclusion of prospective insureds from purchasing flood insurance
at rates less than those estimated under paragraph (1), as required by
paragraph (2), for certain properties, including for--
`(A) any property which is not the primary residence of an individual;
`(B) any severe repetitive loss property, as defined in section 1361A(b);
`(C) any property that has incurred flood-related damage in which the
cumulative amounts of payments under this title equaled or exceeded
the fair market value of such property;
`(D) any business property; and
`(E) any property which on or after the date of enactment of the Flood
Insurance Reform and Modernization Act of 2006 has experienced or sustained--
`(i) substantial damage exceeding 50 percent of the fair market value
of such property; or
`(ii) substantial improvement exceeding 30 percent of the fair market
value of such property.'; and
(B) by adding at the end the following:
`(g) No Extension of Subsidy to New Policies or Lapsed Policies- The Director
shall not provide flood insurance to prospective insureds at rates less
than those estimated under subsection (a)(1), as required by paragraph (2)
of that subsection, for--
`(1) any property not insured by the flood insurance program as of the
date of enactment of the Flood Insurance Reform and Modernization Act
of 2006; and
`(2) any policy under the flood insurance program that has lapsed in coverage,
as a result of the deliberate choice of the holder of such policy.'.
(2) EFFECTIVE DATE- The amendments made by paragraph (1) shall become
effective 90 days after the date of the enactment of this Act.
(b) Increase in Annual Limitation on Premium Increases- Section 1308(e)
of the National Flood Insurance Act of 1968 (42 U.S.C. 4015(e)) is amended--
(1) by striking `under this title for any properties within any single'
and inserting the following: `under this title for any properties--
(2) by striking `10 percent' and inserting `15 percent'; and
(3) by striking the period at the end and inserting the following: `;
and
`(2) described in section 1307(a)(4) shall be increased by 25 percent
each year, until the average risk premium rate for such properties is
equal to the average of the risk premium rates for properties described
under paragraph (1).'.
SEC. 5. MANDATORY COVERAGE AREAS.
(a) Special Flood Hazard Areas- Not later than 90 days after the date of
enactment of this Act, the Director shall issue final regulations establishing
a revised definition of areas of special flood hazards for purposes of the
National Flood Insurance Program.
(b) Residual Risk Areas- The regulations required by subsection (a) shall--
(1) include any area previously identified by the Director as an area
having special flood hazards under section 102 of the Flood Disaster Protection
Act of 1973 (42 U.S.C. 4012a)); and
(2) require the expansion of areas of special flood hazards to include
areas of residual risk, including areas that are located behind levees,
dams, and other man-made structures.
(c) Mandatory Participation in National Flood Insurance Program-
(1) IN GENERAL- Any area described in subsection (b) shall be subject
to the mandatory purchase requirements of sections 102 and 202 of the
Flood Disaster Protection Act of 1973 (42 U.S.C. 4012a, 4106).
(2) LIMITATION- The mandatory purchase requirement under paragraph (1)
shall have no force or effect until the Director completes the mapping
of all residual risk areas in the United States that the Director determines
essential in order to administer the National Flood Insurance Program,
as required under section 17.
SEC. 6. PREMIUM ADJUSTMENT.
Section 1308 of the National Flood Insurance Act of 1968 (42 U.S.C. 4015)
is amended by adding at the end the following:
`(g) Premium Adjustment to Reflect Current Risk of Flood- Notwithstanding
subsection (f), and upon completion of the updating of any flood insurance
rate map under this Act, the Flood Disaster Protection Act of 1973, or the
Flood Insurance Reform and Modernization Act of 2006, any property located
in an area that is participating in the national flood insurance program
may have the risk premium rate charged for flood insurance on such property
adjusted to accurately reflect the current risk of flood to such property,
subject to any other provision of this Act.'.
SEC. 7. STATE CHARTERED FINANCIAL INSTITUTIONS.
Section 1305(c) of the National Flood Insurance Act of 1968 (42 U.S.C. 4012(c))
is amended--
(1) in paragraph (1), by striking `; and' and inserting a semicolon;
(2) in paragraph (2), by striking the period at the end and inserting
`; and'; and
(3) by adding at the end the following:
`(3) given satisfactory assurance that by December 31, 2008, lending institutions
chartered by a State, and not insured by the Federal Deposit Insurance
Corporation, shall be subject to regulations by that State that are consistent
with the requirements of section 102 of the Flood Disaster Protection
Act of 1973 (42 U.S.C. 4012a).'.
SEC. 8. ENFORCEMENT.
Section 102(f)(5) of the Flood Disaster Protection Act of 1973 (42 U.S.C.
4012a(f)(5)) is amended--
(1) in the first sentence, by striking `$350' and inserting `$2,000';
and
(2) by striking the second sentence.
SEC. 9. ESCROW OF FLOOD INSURANCE PAYMENTS.
(a) In General- Section 102(d) of the Flood Disaster Protection Act of 1973
(42 U.S.C. 4012a(d)) is amended--
(1) by amending paragraph (1) to read as follows:
`(1) REGULATED LENDING INSTITUTIONS- Each Federal entity for lending regulation
(after consultation and coordination with the Federal Financial Institutions
Examination Council) shall, by regulation, direct that any premiums and
fees for flood insurance under the National Flood Insurance Act of 1968,
on any property for which a loan has been made for acquisition or construction
purposes shall be paid to the mortgage lender, with the same frequency
as payments on the loan are made, for the duration of the loan. Upon receipt
of any premiums or fees, the lender shall deposit such premiums and fees
in an escrow account on behalf of the borrower. Upon receipt of a notice
from the Director or the provider of the flood insurance that insurance
premiums are due, the remaining balance of an escrow account shall be
paid to the provider of the flood insurance.'; and
(2) by adding at the end the following:
`(6) NOTICE UPON LOAN TERMINATION- Upon final payment of the mortgage,
a regulated lending institution shall provide notice to the policyholder
that insurance coverage may cease with such final payment. The regulated
lending institution shall also provide direction as to how the homeowner
may continue flood insurance coverage after the life of the loan.'.
(b) Applicability- The amendment made by subsection (a)(1) shall apply to
any mortgage outstanding or entered into on or after the expiration of the
2-year period beginning on the date of enactment of this Act.
SEC. 10. FINANCING OF FUNDS FROM THE TREASURY.
(a) In General- Notwithstanding the requirements of section 15(e) of the
Federal Flood Insurance Act of 1956 (42 U.S.C. 2414(e)), the Secretary of
the Treasury is authorized and directed to transfer, without securing any
notes or other obligations from the Director, such sums as may be necessary
for the payment of claims for any damage to or loss of property which is
covered by flood insurance made available under the National Flood Insurance
Program, including any sums which are in excess of amounts borrowed by the
Director from the Secretary, as of the date of enactment of this Act, under
the authority vested to the Director under section 1309 of the National
Flood Insurance Act of 1968 (42 U.S.C. 4016), to pay claims resulting from
the hurricane season of 2005.
(b) Public Debt Transactions- In meeting the obligations established under
subsection (a), the Secretary of the Treasury is authorized to use as a
public debt transaction the proceeds of the sale of any securities issued
after the date of enactment of this Act under chapter 31 of title 31, United
States Code.
SEC. 11. BORROWING AUTHORITY DEBT FORGIVENESS.
(a) In General- The Secretary of the Treasury relinquishes the right to
any repayment of amounts due from the Director in connection with the exercise
of the authority vested to the Director to borrow such sums under section
1309 of the National Flood Insurance Act of 1968 (42 U.S.C. 4016), to the
extent such borrowed sums were used to fund the payment of flood insurance
claims under the National Flood Insurance Program for any damage to or loss
of property resulting from the hurricanes of 2005.
(b) Certification- The debt forgiveness described under subsection (a) shall
only take effect if the Director certifies to the Secretary of Treasury
that all authorized resources or funds available to the Director to operate
the National Flood Insurance Program--
(1) have been otherwise obligated to pay claims under the National Flood
Insurance Program; and
(2) are not otherwise available to make payments to the Secretary on any
outstanding notes or obligations issued by the Director and held by the
Secretary.
(c) Decrease in Borrowing Authority- The first sentence of subsection (a)
of section 1309 of the National Flood Insurance Act of 1968 (42 U.S.C. 4016(a)),
as amended by the National Flood Insurance Program Enhanced Borrowing Authority
Act of 2006 (Public Law 109-208; 120 Stat. 317), is amended by striking
`$20,775,000,000' and inserting `$1,500,000,000'.
SEC. 12. MINIMUM DEDUCTIBLES FOR CLAIMS UNDER THE NATIONAL FLOOD INSURANCE
PROGRAM.
Section 1312 of the National Flood Insurance Act of 1968 (42 U.S.C. 4019)
is amended--
(1) by striking `The Director is' and inserting the following:
`(a) In General- The Director is'; and
(2) by adding at the end the following:
`(b) Minimum Annual Deductible- For any property or structure which is covered
by flood insurance under this title, the minimum annual deductible shall
be--
`(1) $2,000, if construction or substantial improvement occurred on such
property or structure on or before December 31, 1974, or before the effective
date of an initial flood insurance rate map published by the Director
under section 1360 for the area in which such property or structure is
located; and
`(2) $1,000, if construction or substantial improvement occurred on such
property or structure after December 31, 1974, or after the effective
date of an initial flood insurance rate map published by the Director
under section 1360 for the area in which such property or structure is
located.'.
SEC. 13. CONSIDERATIONS IN DETERMINING CHARGEABLE PREMIUM RATES.
Section 1308 of the National Flood Insurance Act of 1968 (42 U.S.C. 4015(b))
is amended--
(1) in subsection (a), by striking `, after consultation with' and all
that follows through `by regulation' and inserting `prescribe, after providing
notice';
(A) in paragraph (1), by striking the period at the end and inserting
a semicolon;
(B) in paragraph (2), by striking the comma at the end and inserting
a semicolon;
(C) in paragraph (3), by striking `, and' and inserting a semicolon;
(D) in paragraph (4), by striking the period and inserting `; and';
and
(E) by adding at the end the following:
`(5) adequate, on the basis of accepted actuarial principles, to cover
the average historical loss year obligations incurred by the National
Flood Insurance Fund.'; and
(3) by adding at the end the following:
`(h) Rule of Construction- For purposes of this section, the calculation
of an `average historical loss year' includes catastrophic loss years.'.
SEC. 14. RESERVE FUND.
Chapter I of the National Flood Insurance Act of 1968 (42 U.S.C. 4011 et
seq.) is amended by inserting after section 1310 the following:
`SEC. 1310A. RESERVE FUND.
`(a) In General- In carrying out the flood insurance program authorized
by this chapter, the Director shall establish in the Treasury of the United
States a National Flood Insurance Reserve Fund (in this section referred
to as the `Reserve Fund') which shall--
`(1) be an account separate from any other accounts or funds available
to the Director; and
`(2) be available for meeting the expected future obligations of the flood
insurance program.
`(b) Reserve Ratio- Subject to the phase-in requirements under subsection
(d), the Reserve Fund shall maintain a balance equal to--
`(1) 1 percent of the sum of the total potential loss exposure of all
outstanding flood insurance policies in force in the prior fiscal year;
or
`(2) such higher percentage as the Director determines to be appropriate,
taking into consideration any circumstance that may raise a significant
risk of substantial future losses to the Reserve Fund.
`(c) Maintenance of Reserve Ratio-
`(1) IN GENERAL- The Director shall have the authority to establish, increase,
or decrease the amount of aggregate annual insurance premiums to be collected
for any fiscal year necessary--
`(A) to maintain the reserve ratio required under subsection (b); and
`(B) to achieve such reserve ratio, if the actual balance of such reserve
is below the amount required under subsection (b).
`(2) CONSIDERATIONS- In exercising the authority granted under paragraph
(1), the Director shall consider--
`(A) the expected operating expenses of the Reserve Fund;
`(B) the insurance loss expenditures under the flood insurance program;
`(C) any investment income generated under the flood insurance program;
and
`(D) any other factor that the Director determines appropriate.
`(3) LIMITATION- In exercising the authority granted under paragraph (1),
the Director may not establish, increase, or decrease the amount of aggregate
annual insurance premiums to be collected for any fiscal year in excess
of any amount necessary--
`(A) to maintain the reserve ratio required under subsection (b); and
`(B) to achieve such reserve ratio, if the actual balance of such reserve
is below the amount required under subsection (b).
`(d) Phase-In Requirements- The phase-in requirements under this subsection
are as follows:
`(1) For fiscal year 2007, the reserve ratio shall be equal to not less
than 10 percent of the reserve ratio required under subsection (b).
`(2) For fiscal year 2008, the reserve ratio shall be equal to not less
than 20 percent of the reserve ratio required under subsection (b).
`(3) For fiscal year 2009, the reserve ratio shall be equal to not less
than 30 percent of the reserve ratio required under subsection (b).
`(4) For fiscal year 2010, the reserve ratio shall be equal to not less
than 40 percent of the reserve ratio required under subsection (b).
`(5) For fiscal year 2011, the reserve ratio shall be equal to not less
than 50 percent of the reserve ratio required under subsection (b).
`(6) For fiscal year 2012, the reserve ratio shall be equal to not less
than 60 percent of the reserve ratio required under subsection (b).
`(7) For fiscal year 2013, the reserve ratio shall be equal to not less
than 70 percent of the reserve ratio required under subsection (b).
`(8) For fiscal year 2014, the reserve ratio shall be equal to not less
than 80 percent of the reserve ratio required under subsection (b).
`(9) For fiscal year 2015, the reserve ratio shall be equal to not less
than 90 percent of the reserve ratio required under subsection (b).
`(e) Limitation on Reserve Ratio- In any given fiscal year, if the Director
determines that attaining the reserve ratio required under subsection (b)
would have serious negative consequences to the flood insurance program,
the Director shall submit a report to Congress that--
`(1) describes and details the specific concerns of the Director regarding
such consequences;
`(2) demonstrates how such consequences would harm the long-term financial
soundness of the flood insurance program; and
`(3) indicates the maximum attainable reserve ratio for that particular
fiscal year.'.
SEC. 15. REPAYMENT PLAN FOR BORROWING AUTHORITY.
Section 1309 of the National Flood Insurance Act of 1968 (42 U.S.C. 4016)
is amended by adding at the end the following:
`(c) Any funds borrowed by the Director under the authority established
in subsection (a) shall include a schedule for repayment of such amounts
which shall be transmitted to the--
`(1) Secretary of the Treasury;
`(2) Committee on Banking, Housing, and Urban Affairs of the Senate; and
`(3) Committee on Financial Services of the House of Representatives.
`(d) In addition to the requirement under subsection (c), in connection
with any funds borrowed by the Director under the authority established
in subsection (a), the Director, beginning 6 months after the date on which
such borrowed funds are issued, and continuing every 6 months thereafter
until such borrowed funds are fully repaid, shall submit a report on the
progress of such repayment to the--
`(1) Secretary of the Treasury;
`(2) Committee on Banking, Housing, and Urban Affairs of the Senate; and
`(3) Committee on Financial Services of the House of Representatives.'.
SEC. 16. TECHNICAL MAPPING ADVISORY COUNCIL.
(a) Establishment- There is established a council to be known as the Technical
Mapping Advisory Council (in this section referred to as the `Council').
(1) IN GENERAL- The Council shall consist of the Director, or the designee
thereof, and 11 additional members to be appointed by the Director or
the designee of the Director, who shall be--
(A) the Under Secretary of Commerce for Oceans and Atmosphere (or the
designee thereof);
(B) a member of recognized surveying and mapping professional associations
and organizations;
(C) a member of recognized professional engineering associations and
organizations;
(D) a member of recognized professional associations or organizations
representing flood hazard determination firms;
(E) a representative of the United States Geological Survey;
(F) a representative of the Office of Management and Budget;
(G) a representative of recognized professional associations or organizations
representing State geographic information;
(H) a representative of State national flood insurance coordination
offices;
(I) a representative of the Corps of Engineers;
(J) the Secretary of the Interior (or the designee thereof); and
(K) the Secretary of Agriculture (or the designee thereof).
(2) QUALIFICATIONS- Members of the Council shall be appointed based on
their demonstrated knowledge and competence regarding surveying, cartography,
remote sensing, geographic information systems, or the technical aspects
of preparing and using flood insurance rate maps.
(c) Duties- The Council shall--
(1) make recommendations to the Director on how to improve in a cost-effective
manner the accuracy, general quality, ease of use, and distribution and
dissemination of flood insurance rate maps;
(2) recommend to the Director mapping standards and guidelines for flood
insurance rate maps; and
(3) submit an annual report to the Director that contains--
(A) a description of the activities of the Council;
(B) an evaluation of the status and performance of flood insurance rate
maps and mapping activities to revise and update flood insurance rate
maps, as required under section 17;
(C) a summary of recommendations made by the Council to the Director,
including--
(i) performance metrics and milestones to effectively and efficiently
map flood risk areas in the United States;
(ii) procedures for delegating mapping activities to State and local
government mapping partners; and
(iii) establishing standards for data quality, data currency, and
data eligibility; and
(D) recommendations for private contractors to carry out the recommendations
of the Council.
(d) Chairperson- The members of the Council shall elect 1 member to serve
as the chairperson of the Council (in this section referred to as the `Chairperson').
(e) Coordination- To ensure that the Council's recommendations are consistent,
to the maximum extent practicable, with national digital spatial data collection
and management standards, the Chairperson shall consult with the Chairperson
of the Federal Geographic Data Committee (established pursuant to OMB Circular
A-16).
(f) Compensation- Members of the Council shall receive no additional compensation
by reason of their service on the Council.
(g) Meetings and Actions-
(1) IN GENERAL- The Council shall meet not less frequently than twice
each year at the request of the Chairperson or a majority of its members,
and may take action by a vote of the majority of the members.
(2) INITIAL MEETING- The Director, or a person designated by the Director,
shall request and coordinate the initial meeting of the Council.
(h) Officers- The Chairperson may appoint officers to assist in carrying
out the duties of the Council under subsection (c).
(i) Staff of FEMA- Upon the request of the Chairperson, the Director may
detail, on a nonreimbursable basis, personnel of the Federal Emergency Management
Agency to assist the Council in carrying out its duties.
(j) Powers- In carrying out this section, the Council may hold hearings,
receive evidence and assistance, provide information, and conduct research,
as it considers appropriate.
(k) Termination- The Council shall terminate 5 years after the date of enactment
of this Act.
SEC. 17. NATIONAL FLOOD MAPPING PROGRAM.
(a) Reviewing, Updating, and Maintaining Maps- The Director, in coordination
with the Technical Mapping Advisory Council established under section 16,
shall establish a program under which the Director shall review, update,
and maintain National Flood Insurance Program rate maps in accordance with
this section.
(1) IN GENERAL- In carrying out the program established under subsection
(a), the Director shall--
(A) identify, review, update, maintain, and publish National Flood Insurance
Program rate maps with respect to--
(i) all areas located within the 500-year floodplain that have not
previously been identified, including coastal areas located in the
United States;
(ii) areas of residual risk that have not previously been identified,
including areas that are located behind levees, dams, and other man-made
structures; and
(iii) areas that could be inundated as a result of the failure of
a dam, as identified under the National Dam Safety Program Act (33
U.S.C. 467 et seq.);
(B) establish or update flood-risk zone data in all such areas, and
make estimates with respect to the rates of probable flood caused loss
for the various flood risk zones for each such area; and
(C) use, in identifying, reviewing, updating, maintaining, or publishing
any National Flood Insurance Program rate map required under this section
or under the National Flood Insurance Act of 1968, the most accurate
topography and elevation data available.
(2) MAPPING ELEMENTS- Each map updated under this section shall include
the following:
(A) NEW GROUND ELEVATION DATA-
(i) IN GENERAL- New ground elevation data utilizing the newest technologies
for the development of hydrologic and hydraulic modeling to support
all flooding sources.
(ii) DEFINITION- As used in clause (i), the term `new ground elevation
data' means data that meets the requirements of Appendix A, Guidance
for Aerial Mapping and Surveying, of the Federal Emergency Management
Agency's `Guidelines and Specifications for Flood Hazard Mapping Partners'
as in effect on the date of enactment of this Act.
(B) DATA ON A WATERSHED BASIS- Delineation of National Flood Insurance
Program flood data on a watershed basis--
(i) to provide the most technically effective and efficient studies
and hydrologic and hydraulic modeling; and
(ii) to eliminate, to the maximum extent possible, discrepancies in
base flood elevations between adjacent political subdivisions.
(C) VERTICAL POSITIONING- Vertical positioning of the lowest floor and
lowest adjacent grade coordinate elevation data in the national inventory
of structures.
(3) OTHER INCLUSIONS- In updating maps under this section, the Director
shall include--
(A) any relevant information on coastal inundation from--
(i) an applicable inundation map of the Corps of Engineers; and
(ii) data of the National Oceanic and Atmospheric Administration relating
to storm surge modeling;
(B) any relevant information of the United States Geological Survey
on stream flows, watershed characteristics, and topography that is useful
in the identification of flood hazard areas, as determined by the Director;
and
(C) a description of any hazard that might impact flooding, including,
as determined by the Director--
(i) land subsidence and coastal erosion areas;
(ii) sediment flow areas;
(v) areas on coasts and inland that are subject to the failure of
structural protective works, such as levees, dams, and floodwalls.
(c) Standards- In updating and maintaining maps under this section, the
Director shall--
(1) establish standards to--
(A) ensure that maps are adequate for--
(i) flood risk determinations; and
(ii) use by State and local governments in managing development to
reduce the risk of flooding; and
(B) facilitate identification and use of consistent methods of data
collection and analysis by the Director, in conjunction with State and
local governments, in developing maps for communities with similar flood
risks, as determined by the Director; and
(2) publish maps in a format that is--
(B) geospatial data-compliant, as determined in accordance with the
standards for such compliance established by the Open Geospatial Consortium;
and
(C) compliant with the North American Vertical Datum of 1988.
(d) Authorization of Appropriations- There is authorized to be appropriated
to the Director to carry out this section $400,000,000 for each of fiscal
years 2007 through 2012.
SEC. 18. REMOVAL OF LIMITATION ON STATE CONTRIBUTIONS FOR UPDATING FLOOD
MAPS.
Section 1360(f)(2) of the National Flood Insurance Act of 1968 (42 U.S.C.
4101(f)(2)) is amended by striking `, but which may not exceed 50 percent
of the cost of carrying out the requested revision or update'.
SEC. 19. NONMANDATORY PARTICIPATION.
(a) Nonmandatory Participation in National Flood Insurance Program for 500-Year
Floodplain- Any area located within the 500-year floodplain shall not be
subject to the mandatory purchase requirements of sections 102 or 202 of
the Flood Disaster Protection Act of 1973 (42 U.S.C. 4012a, 4106).
(1) BY DIRECTOR- In carrying out the National Flood Insurance Program,
the Director shall provide notice to any community located in an area
within the 500-year floodplain.
(2) TIMING OF NOTICE- The notice required under paragraph (1) shall be
made not later than 6 months after the date of completion of the initial
mapping of the 500-year floodplain, as required under section 17.
(3) LENDER REQUIRED NOTICE-
(A) REGULATED LENDING INSTITUTIONS- Each Federal or State entity for
lending regulation (after consultation and coordination with the Federal
Financial Institutions Examination Council) shall, by regulation, require
regulated lending institutions, as a condition of making, increasing,
extending, or renewing any loan secured by property located in an area
within the 500-year floodplain, to notify the purchaser or lessee (or
obtain satisfactory assurances that the seller or lessor has notified
the purchaser or lessee) and the servicer of the loan that such property
is located in an area within the 500-year floodplain, in a manner that
is consistent with and substantially identical to the notice required
under section 1364(a)(1) of the National Flood Insurance Act of 1968
(42 U.S.C. 4104a(a)(1)).
(B) FEDERAL OR STATE AGENCY LENDERS- Each Federal or State agency lender
shall, by regulation, require notification in the same manner as provided
under subparagraph (A) with respect to any loan that is made by a Federal
or State agency lender and secured by property located in an area within
the 500-year floodplain.
(C) PENALTY FOR NONCOMPLIANCE- Any regulated lending institution or
Federal or State agency lender that fails to comply with the notice
requirements established by this paragraph shall be subject to the penalties
prescribed under section 102(f)(5) of the Flood Disaster Protection
Act of 1973 (42 U.S.C. 4012a(f)(5)).
SEC. 20. NOTICE OF FLOOD INSURANCE AVAILABILITY UNDER RESPA.
Section 5(b) of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C.
2604(b)) is amended--
(1) in paragraph (4), by striking `; and' and inserting a semicolon;
(2) in paragraph (5), by striking the period and inserting `; and'; and
(3) by adding at the end the following:
`(6) an explanation of flood insurance and the availability of flood insurance
under the National Flood Insurance Program, whether or not the real estate
is located in an area having special flood hazards.'.
SEC. 21. TESTING OF NEW FLOODPROOFING TECHNOLOGIES.
(a) Permissible Testing- A residential structure built for the purpose of
testing a new flood proofing technology, as described in subsection (b),
in any State or community that receives mitigation assistance under section
1366 of the National Flood Insurance Act of 1968 (42 U.S.C. 4104c) may not
be construed to be in violation of any flood risk mitigation plan developed
by that State or community and approved by the Director of the Federal Emergency
Management Agency.
(b) Conditions on Testing- Testing permitted under subsection (a) shall--
(1) be performed on an uninhabited residential structure;
(2) require dismantling of the structure at the conclusion of such testing;
and
(3) require that all costs associated with such testing and dismantling
be covered by the individual or entity conducting the testing, or on whose
behalf the testing is conducted.
(c) Rule of Construction- Nothing in this section shall be construed to
alter, limit, or extend the availability of flood insurance to any structure
that may employ, utilize, or apply any technology tested under subsection
(b).
SEC. 22. PARTICIPATION IN STATE DISASTER CLAIMS MEDIATION PROGRAMS.
Chapter I of the National Flood Insurance Act of 1968 (42 U.S.C. 4011 et
seq.) is amended by inserting after section 1313 the following:
`SEC. 1314. PARTICIPATION IN STATE DISASTER CLAIMS MEDIATION PROGRAMS.
`(a) Requirement to Participate- In the case of the occurrence of a major
disaster, as defined in section 102 of the Robert T. Stafford Disaster Relief
and Emergency Assistance Act (42 U.S.C. 5122) that may have resulted in
flood damage under the flood insurance program established under this chapter
and other personal lines residential property insurance coverage offered
by a State regulated insurer, upon request made by the insurance commissioner
of a State (or such other official responsible for regulating the business
of insurance in the State) for the participation of representatives of the
Director in a program sponsored by such State for nonbinding mediation of
insurance claims resulting from a major disaster, the Director shall cause
representatives of the flood insurance program to participate in such a
State program where claims under the flood insurance program are involved
to expedite settlement of flood damage claims resulting from such disaster.
`(b) Extent of Participation- In satisfying the requirements of subsection
(a), the Director shall require that each representative of the Director--
`(1) be certified for purposes of the flood insurance program to settle
claims against such program resulting from such disaster in amounts up
to the limits of policies under such program;
`(2) attend State-sponsored mediation meetings regarding flood insurance
claims resulting from such disaster at such times and places as may be
arranged by the State;
`(3) participate in good faith negotiations toward the settlement of such
claims with policyholders of coverage made available under the flood insurance
program; and
`(4) finalize the settlement of such claims on behalf of the flood insurance
program with such policyholders.
`(c) Coordination- Representatives of the Director shall at all times coordinate
their activities with insurance officials of the State and representatives
of insurers for the purposes of consolidating and expediting settlement
of claims under the national flood insurance program resulting from such
disaster.
`(d) Qualifications of Mediators- Each State mediator participating in State-sponsored
mediation under this section shall be--
`(1)(A) a member in good standing of the State bar in the State in which
the mediation is to occur with at least 2 years of practical experience;
and
`(B) an active member of such bar for at least 1 year prior to the year
in which such mediator's participation is sought; or
`(2) a retired trial judge from any United States jurisdiction who was
a member in good standing of the bar in the State in which the judge presided
for at least 5 years prior to the year in which such mediator's participation
is sought.
`(e) Mediation Proceedings and Documents Privileged- As a condition of participation,
all statements made and documents produced pursuant to State-sponsored mediation
involving representatives of the Director shall be deemed privileged and
confidential settlement negotiations made in anticipation of litigation.
`(f) Liability, Rights, or Obligations Not Affected- Participation in State-sponsored
mediation, as described in this section does not--
`(1) affect or expand the liability of any party in contract or in tort;
or
`(2) affect the rights or obligations of the parties, as established--
`(A) in any regulation issued by the Director, including any regulation
relating to a Standard Flood Insurance Policy;
`(C) under any other provision of Federal law.
`(g) Exclusive Federal Jurisdiction- Participation in State-sponsored mediation
shall not alter, change, or modify the original exclusive jurisdiction of
United States courts, as set forth in this Act.
`(h) Cost Limitation- Nothing in this section shall be construed to require
the Director or a representative of the Director to pay additional mediation
fees relating to flood insurance claims associated with a State-sponsored
mediation program in which such representative of the Director participates.
`(i) Exception- In the case of the occurrence of a major disaster that results
in flood damage claims under the national flood insurance program and that
does not result in any loss covered by a personal lines residential property
insurance policy--
`(1) this section shall not apply; and
`(2) the provisions of the Standard Flood Insurance Policy under the national
flood insurance program and the appeals process established under section
205 of the Bunning-Bereuter-Blumenauer Flood Insurance Reform Act of 2004
(42 U.S.C. 4011 note) and the regulations issued pursuant to such section
shall apply exclusively.
`(j) Representatives of the Director- For purposes of this section, the
term `representatives of the Director' means representatives of the national
flood insurance program who participate in the appeals process established
under section 205 of the Bunning-Bereuter-Blumenauer Flood Insurance Reform
Act of 2004 (42 U.S.C. 4011 note).'.
SEC. 23. REITERATION OF FEMA RESPONSIBILITIES UNDER THE 2004 REFORM ACT.
(a) Appeals Process- As required in section 205 of the Bunning-Bereuter-Blumenauer
Flood Insurance Reform Act of 2004 (42 U.S.C. 4011 note), the Director shall
establish an appeals process through which holders of a flood insurance
policy may appeal the decisions, with respect to claims, proofs of loss,
and loss estimates relating to such flood insurance policy, of--
(1) any insurance agent or adjuster, or insurance company; or
(2) any employee or contractor of the Federal Emergency Management Agency.
(b) Minimum Training and Education Requirements- The Director shall continue
to work with the insurance industry, State insurance regulators, and other
interested parties to implement the minimum training and education standards
for all insurance agents who sell flood insurance policies, as such standards
were determined by the Director in the notice published in the Federal Register
on September 1, 2005 (70 Fed. Reg. 52117) pursuant to section 207 of the
Bunning-Bereuter-Blumenauer Flood Insurance Reform Act of 2004 (42 U.S.C.
4011 note).
(c) Implementation Reports-
(1) OVERALL IMPLEMENTATION OF REFORM ACT OF 2004- Not later than 3 months
after the date of the enactment of this Act, the Director shall submit
a report to the Congress--
(A) describing the implementation of each provision of the Bunning-Bereuter-Blumenauer
Flood Insurance Reform Act of 2004 (Public Law 108-264; 118 Stat. 712);
and
(B) identifying each regulation, order, notice, and other material issued
by the Director in implementing each provision of that Act.
(2) IMPLEMENTATION OF APPEALS PROCESS-
(A) IN GENERAL- Not later than 30 days after the date of enactment of
this Act, and every 30 days thereafter until final establishment of
the appeals process required under section 205 of the Bunning-Bereuter-Blumenauer
Flood Insurance Reform Act of 2004 (42 U.S.C. 4011 note), the Director
shall submit a report to the Congress describing the implementation
of such appeals process.
(B) CONTENT OF REPORT- Each report required under subparagraph (A) shall
include--
(i) dates and descriptions of actions taken by the Director to establish
the appeals process;
(ii) dates and descriptions of all communications to the Congress
by the Director concerning the establishment of such process;
(iii) explanations of any statutory or implied deadlines that have
not been met; and
(iv) an estimate of when any regulation, order, notice, or other material
will be issued by the Director in establishing such process.
SEC. 24. STUDIES, AUDITS, AND REPORTS.
(a) GAO Study on Write Your Own Policies- Not later than 1 year after the
date of enactment of this Act, the Comptroller General of the United States
shall conduct a study and submit a report to the Committee on Banking, Housing,
and Urban Affairs of the Senate and the Committee on Financial Services
of the House of Representatives that examines--
(1) the current fees and expenses paid from premium income earned under
the National Flood Insurance Program to cover the cost of selling, servicing,
and processing of claims in connection with National Flood Insurance Program
policies, as well as floodplain management and mitigation activities,
by--
(A) companies that are authorized by the Director to provide Write Your
Own policies;
(B) National Flood Insurance Program contractors; and
(C) the Federal Emergency Management Agency;
(A) each of the 5 other lines of insurance the National Flood Insurance
Program currently uses to evaluate the amount of reimbursement paid
to authorized providers of Write Your Own policies; and
(B) the expenses incurred by such providers in administering the National
Flood Insurance Program on behalf of the Federal Government;
(3) the cost difference for authorized providers of Write Your Own policies
between--
(A) flood insurance policies at origination and flood insurance policies
up for renewal; and
(B) flood insurance policies written for policyholders who are required
to purchase flood insurance and flood insurance policies written for
those policyholders who are not required to purchase flood insurance;
(4) the similarities and differences in the expenses incurred in administering
the National Flood Insurance Program and those incurred in administering
other lines of Federal, State, and private company insurance;
(5) in detail what actions the Director is taking to ensure that authorized
providers of Write Your Own policies are only being reimbursed for their
expenses in providing such policies;
(6) in detail the additional benefits authorized providers of Write Your
Own policies receive by not underwriting flood risk, including the ability
to market and sell other lines of insurance; and
(7) the feasibility of using a competitive bidding process, or other alternative,
to select 1 or more private insurance companies to sell and service National
Flood Insurance Program policies and process claims for fees agreed upon
by contract with the Director.
(b) GAO Audit- Not later than 1 year after the date of enactment of this
Act, the Comptroller General of the United States shall audit the financial
transactions of the National Flood Insurance Program relating to the consequences
of Hurricane Katrina and other hurricanes of the 2005 season, including
any transactions--
(1) for making any payments required under section 1334 of the National
Flood Insurance Act of 1968 (42 U.S.C. 4054);
(2) to pay reinsurance claims under the excess loss reinsurance coverage
provided under section 1335 of that Act (42 U.S.C. 4055);
(3) to repay to the Secretary of the Treasury such sums as may have been
borrowed from the Secretary in accordance with the authority provided
in section 1309 of that Act (42 U.S.C. 4016);
(4) to the extent approved in appropriations Acts, to pay any administrative
expenses of the National Flood Insurance Program;
(5) for the purposes specified in section 1310(d) of that Act (42 U.S.C.
4017(d)) under the conditions provided in such section;
(6) for carrying out the program under section 1315(b) of that Act (42
U.S.C. 4022(b));
(7) for transfers to the National Flood Mitigation Fund, but only to the
extent provided in section 1367(b)(1) of that Act (42 U.S.C. 4104d(b)(1));
(8) for financial assistance under section 1361A of that Act (42 U.S.C.
4102a) to a State or community for taking actions under such section with
respect to severe repetitive loss properties, but only to the extent provided
in section 1361A(i) of that Act; and
(9) that resulted in amounts being credited to the National Flood Insurance
Program, including amounts--
(A) borrowed in accordance with the authority provided in section 1309
of that Act (42 U.S.C. 4016);
(B) collected in connection with the excess loss reinsurance coverage
provided under section 1335 of that Act (42 U.S.C. 4055);
(C) advanced to the National Flood Insurance Program from appropriations
in order to maintain the National Flood Insurance Fund established in
section 1310 of that Act (42 U.S.C. 4017) in an operative condition
adequate to meet the liabilities of the Program;
(D) earned on investments;
(E) required to be paid to the Director under section 1308(d) of that
Act (42 U.S.C. 4015(d)); and
(F) received from any other operation or activity performed under that
Act.
(c) Report on Expanding the National Flood Insurance Program- Not later
than 1 year after the date of the enactment of this Act, the Comptroller
General of the United States shall conduct a study and submit a report to
the Committee on Banking, Housing, and Urban Affairs of the Senate and the
Committee on Financial Services of the House of Representatives, on--
(1) the number of flood insurance policy holders currently insuring--
(A) a residential structure up to the maximum available coverage amount,
as established in section 61.6 of title 44, Code of Federal Regulations,
of--
(i) $250,000 for the structure; and
(ii) $100,000 for the contents of such structure; or
(B) a commercial structure up to the maximum available coverage amount,
as established in section 61.6 of title 44, Code of Federal Regulations,
of $500,000;
(2) the increased losses the National Flood Insurance Program would have
sustained during the 2004 and 2005 hurricane season if the National Flood
Insurance Program had insured all policyholders up to the maximum conforming
loan limit for fiscal year 2006 of $417,000, as established under section
302(b)(2) of the Federal National Mortgage Association Charter Act (12
U.S.C. 1717(b)(2));
(3) the availability in the private marketplace of flood insurance coverage
in amounts that exceed the current limits of coverage amounts established
in section 61.6 of title 44, Code of Federal Regulations; and
(4) what effect, if any--
(A) raising the current limits of coverage amounts established in section
61.6 of title 44, Code of Federal Regulations, would have on the ability
of private insurers to continue providing flood insurance coverage;
and
(B) reducing the current limits of coverage amounts established in section
61.6 of title 44, Code of Federal Regulations, would have on the ability
of private insurers to provide sufficient flood insurance coverage to
effectively replace the current level of flood insurance coverage being
provided under the National Flood Insurance Program.
(d) Report of the Director on Activities Under the National Flood Insurance
Program-
(1) IN GENERAL- The Director shall, on an annual basis, submit a full
report on the operations, activities, budget, receipts, and expenditures
of the National Flood Insurance Program for the preceding 12-month period
to the Committee on Banking, Housing, and Urban Affairs of the Senate
and the Committee on Financial Services of the House of Representatives.
(2) TIMING- Each report required under paragraph (1) shall be submitted
to the committees described in paragraph (1) not later than 3 months following
the end of each fiscal year.
(3) CONTENTS- Each report required under paragraph (1) shall include--
(A) the current financial condition and income statement of the National
Flood Insurance Fund established under section 1310 of the National
Flood Insurance Act of 1968 (42 U.S.C. 4017), including--
(i) premiums paid into such Fund;
(ii) policy claims against such Fund; and
(iii) expenses in administering such Fund;
(B) the number and face value of all policies issued under the National
Flood Insurance Program that are in force;
(C) a description and summary of the losses attributable to repetitive
loss structures;
(D) a description and summary of all losses incurred by the National
Flood Insurance Program due to--
(i) hurricane related damage; and
(ii) nonhurricane related damage;
(E) the amounts made available by the Director for mitigation assistance
under section 1366(e)(5) of the National Flood Insurance Act of 1968
(42 U.S.C. 4104c(e)(5)) for the purchase of properties substantially
damaged by flood for that fiscal year, and the actual number of flood
damaged properties purchased and the total cost expended to purchase
such properties;
(F) the estimate of the Director as to the average historical loss year,
and the basis for that estimate;
(G) the estimate of the Director as to the maximum amount of claims
that the National Flood Insurance Program would have to expend in the
event of a catastrophic year;
(i) amount of insurance carried per flood insurance policy;
(ii) premium per flood insurance policy; and
(iii) loss per flood insurance policy; and
(I) the number of claims involving damages in excess of the maximum
amount of flood insurance available under the National Flood Insurance
Program and the sum of the amount of all damages in excess of such amount.
(e) GAO Analysis and Evaluation of the National Flood Insurance Program-
(1) IN GENERAL- Not later than 1 year after the date of enactment of this
Act, the Comptroller General of the United States shall submit a report
evaluating the purposes of the National Flood Insurance Program to the
Committee on Banking, Housing, and Urban Affairs of the Senate and the
Committee on Financial Services of the House of Representatives.
(2) CONTENTS- The report required under paragraph (1) shall include--
(A) an analysis of whether the National Flood Insurance Program has
fulfilled its purpose, as set forth in section 1302 of the National
Flood Insurance Act of 1968 (42 U.S.C. 4001);
(B) an examination of whether the National Flood Insurance Program has
unduly burdened or benefitted taxpayers; and
(C) any recommendations for legislative or administrative action that
the Comptroller General determines are necessary to ensure that the
National Flood Insurance Program operates in a more effective and efficient
manner, including whether the National Flood Insurance Program should
be reorganized into another Federal agency.
(f) GAO Study- Not later than 1 year after the date of the enactment of
this Act, the Comptroller General of the United States shall conduct a study
and submit a report to the Committee on Banking, Housing, and Urban Affairs
of the Senate and the Committee on Financial Services of the House of Representatives,
on the--
(1) composition of the remaining pre-FIRM structures that are explicitly
receiving discounted premium rates under section 1307 of the National
Flood Insurance Act of 1968 (42 U.S.C. 4104), including the historical
basis for the receipt of such subsidy and whether such subsidy has outlasted
its purpose;
(2) number and fair market value of such structures;
(3) respective income level of each owner of such structure;
(4) number of times each such structure has been sold since 1968, including
specific dates, sales price, and any other information the Secretary determines
appropriate;
(5) total losses incurred by such structures since the establishment of
the National Flood Insurance Program compared to the total losses incurred
by all structures that are charged a nondiscounted premium rate;
(6) total cost of foregone premiums since the establishment of the National
Flood Insurance Program, as a result of the subsidies provided to such
structures;
(7) annual cost to the taxpayer, as a result of the subsidies provided
to such structures;
(8) the premium income collected and the losses incurred by the National
Flood Insurance Program as a result of such explicitly subsidized structures
compared to the premium income collected and the losses incurred by such
Program as result of structures that are charged a nondiscounted premium
rate, on a State-by-State basis; and
(9) the most efficient way to eliminate the subsidy to such structures.
(g) GAO Study on Direct Purchase in Nonparticipating Communities- Not later
than 1 year after the date of enactment of this Act, the Comptroller General
of the United States shall conduct a study and submit a report to the Committee
on Banking, Housing, and Urban Affairs of the Senate and the Committee on
Financial Services of the House of Representatives, on the feasibility of
allowing individuals, residing in communities not currently participating
in the National Flood Insurance Program, to purchase flood insurance from
the National Flood Insurance Program on an actuarially sound basis.
Calendar No. 498
109th CONGRESS
2d Session
S. 3589
[Report No. 109-271]
A BILL
To amend the National Flood Insurance Act of 1968, to restore the financial
solvency of the flood insurance fund, and for other purposes.
June 28, 2006
Read twice and placed on the calendar
END
