WASHINGTON, D.C. – September 23, 2013 – (RealEstateRama) — Pressure is building in Congress to delay new insurance legislation being implemented in the wake of the recent flooding in Colorado, despite a top official claiming he does not have the authority to stop premiums raising.
Craig Fugate, the director of the Federal Emergency Management Agency (FEMA), informed a Senate committee that he is unable to stop an increase in insurance premiums for thousands across the country because of homeowners who sustained damages in the floods.
Flood insurance rate increase
The controversial Biggert-Waters flood insurance bill came into effect last year with hardly any opposition. There were warnings changes in the law might lead to large insurance claims by homeowners in coastal communities but this was not enough to stop the legislation being passed by both the House and the Senate. Only one politician, Democrat Senator for Louisiana Mary Landrieu, expressed concern on the Senate floor, stating the bill would need to “fixed” at a later date. Landrieu however later voted “yes”, despite the act not having an affordability clause which would protect homeowners from being charged premiums they could not afford.
Fugate told members of the economic policy subcommittee of the Senate Committee on Banking, Housing and Urban Affairs last week that he is unable to find a way to stop the rate hikes without extra legislative support. Unsatisfied with his response, members urged him to take further action.
Republican Senator for Louisiana, David Vitter noted that if the Obama administration can delay changes to the Affordable Care Act, it can also postpone the Biggert-Waters act because it is not ready for implementation. Vitter suggested that FEMA should suspend parts of the bill because they initially failed to complete a review on affordability that was supposed to be published in April by law. Detractors also claims FEMA doesn’t have data on how to accurately price risks such as the devastating natural disaster in Colorado.
Natural disasters and mortgage premiums
Government officials advise that flood insurance should be taken out when an individual applies for a homeowners loan and FEMA estimates that 20 percent of its 5.5 million policyholders receive subsidies through the National Flood Insurance Program (NFIP). An additional 578,000 individuals who live in flood-risk regions will keep their subsidies until they put their homes on the market or suffer repeated and costly flood losses. The Biggert-Waters act eliminates premium subsidies for second homes, repetitive loss properties and homeowners who do not take steps to mitigate climate risk from insurance. The NFIP enables property owners to purchase insurance directly from the government if they reside in a high-risk area and offer guidance on financial protection from natural disasters such as floods, hurricanes, tropical storms and tornados, collecting over $1.5 billion annually from its policyholders. The American Red Cross, Salvation Army, The United Way and Save The Children are also accepting donations to help victims of the flood and providing financial assistance.
Colorado State of Emergency
The floods began in early September where a slow-moving cold front spread across the state, encountering humid monsoon-style air from the south. Boulder County was worst hit, resulting in the death of 8 people and the disappearance of 648 others.
The incident had a devastating economic impact. Fields and pastures were surged with water, especially on lower-lying agricultural land in the northeast of the state. Significant crop damage is expected from water that is unable to be drained, whilst several oil and gas wells were shut down in the Denver Basin because of an influx of water. Fears of contamination were expressed when broken lines and storage tanks were swept away by the flood and a spill was reported in Milliken on September 18, releasing over 5,000 gallons of crude oil into the South Palette River. Tourism in the area was also affected. Estes Park near the Rocky Mountain National Park asked visitors to stay away during its peak season to allow the landslides and flooded streets to clear. Meanwhile, the Internal Revenue Service has extended tax filing deadlines for victims of the flood in several of the areas affected.
President Obama declared a state of emergency for the wider area and authorized a Federal search and rescue effort for several counties in Colorado, handing out supplies such as food, clean water, emergency generators and clothing for babies and children.