	Introduction

The National Flood Insurance Program (NFIP) is authorized by the National Flood Insurance Act of 1968, and was reauthorized until September 30, 2017, by the Biggert-Waters Flood Insurance Reform Act of 2012 (BW-12). The NFIP is managed by the Federal Emergency Management Agency (FEMA), through its subcomponent Federal Insurance and Mitigation Administration (FIMA). Unless reauthorized or amended by Congress, the following will occur after February 8, 2018:
The authority to provide new flood insurance contracts will expire. The authority for NFIP to borrow funds from the Treasury will be reduced from $30.425 billion to $1 billion. The 21 st Century Flood Reform Act ( H.R. H.R. 2874 passed the House on a vote of 237-189 on November 14, 2017. Proposed Changes to Premiums and Surcharges in H.R. 2874

Section 102 would phase out the pre-FIRM subsidy for primary residences at a rate of 6.5%-15% (compared to the current rate of 5-18%), except that in the first year after enactment, the minimum rate would be 5%; in the second year after enactment, the rate would be 5.5%; and in the third year of enactment, the rate would be 6%. Section 112 would cap the premiums for 1-4 unit residential properties with elevation data meeting standards of the Administrator at $10,000 per year, adjusted for inflation every five years. Section 502 would increase the HFIAA surcharge from $25 to $40 for primary residences and from $250 to $275 for nonresidential properties and most nonprimary residences. If in any given year the Administrator does not do so, for the following fiscal year the Administrator would be required to increase the reserve fund assessment by at least one percentage point over the rate of the annual assessment, and to continue such increases until the fiscal year in which the statutory reserve ratio is achieved. 2874

Section 103 would authorize a state or a consortium of states to create a voluntary flood insurance affordability program for owner-occupants of 1-4 unit residences in communities participating in the NFIP, and for which a Base Flood Elevation (BFE) is identified on a FIRM that is in effect and for which such other information is available as the Administrator considers necessary to determine the flood risk associated with such property. 2874

Section 508 would increase the civil monetary penalties from $2000 to $5000 on federally regulated lenders for failure to comply with enforcing the mandatory purchase requirement. For example, in revising the definition, the bill would strike existing statutory language describing how private flood insurance must provide coverage "as broad as the coverage" provided by the NFIP. Though the majority of regulation of private flood insurance would then rest with individual states, federal regulators would be required to develop and implement requirements relating to the financial strength of private insurance companies from which such entities and agencies will accept private insurance, provided that such requirements shall not affect or conflict with any state law, regulation, or procedure concerning the regulation of the business of insurance. Section 202 would apply the mandatory purchase requirement only to residential improved real estate, thereby eliminating the requirement for other types of properties (e.g., all commercial properties) from January 1, 2019. Section 203 would eliminate the noncompete requirement in the WYO arrangement with FEMA that currently restricts WYO companies from selling both NFIP and private flood insurance policies. Provisions Related to Multiple Loss Properties in H.R. Section 504 would define a new "multiple-loss property" category, which would include three types of properties: (1) a revised definition of repetitive loss property; (2) a severe repetitive loss property, with the same definition as the existing statutory definition; and (3) a new category of extreme repetitive loss property. Any multiple loss properties which are not paying full risk-based rates, and for which two qualified claims payment have been made, would have rates increased at 10% per year until the full risk-based rate is reached. Selected Provisions Related to Floodplain Mapping in H.R.
The National Flood Insurance Program (NFIP) was established by the National Flood Insurance Act of 1968 (NFIA, 42 U.S.C. §4001 et seq.), and was reauthorized until February 8, 2018 (H.R. 195). Unless reauthorized or amended by Congress, the following will occur after February 8, 2018: (1) the authority to provide new flood insurance contracts will expire; and (2) the authority for the NFIP to borrow funds from the Treasury will be reduced from $30.425 billion to $1 billion.
The House passed H.R. 2874, the 21st Century Flood Reform Act, on November 14, 2017, with a vote of 237-189. H.R. 2874 would authorize the NFIP until September 30, 2022. This report summarizes selected provisions of the bill, concentrating on changes related to premiums and surcharges, affordability, increasing participation, the role of private insurance, treatment of multiple loss properties, and some provisions related to floodplain mapping and mitigation.
H.R. 2874 would phase out the subsidy provided for primary residences built before the first Flood Insurance Rate Map (FIRM) was published in their community, at a rate of 6.5%-15% compared to the present rate of 5%-18%. The minimum would be phased in over a four-year period. The phaseout of the pre-FIRM subsidy for other categories of properties would remain at 25%. The Homeowner Flood Insurance Affordability Act of 2014 (HFIAA) surcharge would be increased from $25 to $40 for primary residences and from $250 to $275 for nonresidential properties and most nonprimary residences. The reserve fund assessment would be increased by at least one percentage point per year until the statutory reserve ratio is achieved. The bill would cap the premiums for 1-4 unit residential properties at $10,000 per year. The Federal Emergency Management Agency (FEMA) would be required over time to include additional considerations in the setting of premium rates, including the use of replacement cost value of a property, the difference in flood risk between coastal and inland locations, and the use of risk assessment tools other than FIRMs. H.R. 2874 would authorize a state or a consortium of states to create a voluntary flood insurance affordability program for low-income owner-occupants of 1-4 unit residences, to be funded by a surcharge on other NFIP policyholders in the state(s). The bill would increase the civil penalties from $2,000 to $5,000 on federally regulated lenders for failure to comply with enforcing the mandatory purchase requirement.
H.R. 2874 would strike existing statutory language describing how private flood insurance must provide coverage "as broad as the coverage" provided by the NFIP, and would instead require that policies comply with the laws and regulations of the state where the property is located. Federal regulators would be required to develop and implement regulations relating to the financial strength of private insurers, and lenders would have to accept a private insurance policy from a company with adequate financial strength. The mandatory purchase requirement would be eliminated for commercial property from January 1, 2019. The noncompete clause that currently restricts private companies from selling both NFIP and private flood insurance policies would be eliminated.
H.R. 2874 would define a new "multiple-loss property" category, which would include a revised definition of repetitive loss properties, severe repetitive loss properties, and a new category of extreme repetitive loss properties. Any multiple-loss property with at least two claims after enactment would have rates increased by 10% per year until the rates reflect current risks. Those with at least three future claims would have their rates increased by 15% per year.