69–006 

115TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 1st Session 115–221 

TO REQUIRE THE USE OF REPLACEMENT COST VALUE IN DETERMINING 

THE PREMIUM RATES FOR FLOOD INSURANCE COVERAGE UNDER THE 

NATIONAL FLOOD INSURANCE ACT, AND FOR OTHER PURPOSES 

JULY 14, 2017.—Committed to the Committee of the Whole House on the State of 

the Union and ordered to be printed 

Mr. HENSARLING, from the Committee on Financial Services, 

submitted the following 

R E P O R T 

together with 

MINORITY VIEWS 

[To accompany H.R. 2565] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on Financial Services, to whom was referred the 

bill (H.R. 2565) to require the use of replacement cost value in determining the premium rates for flood insurance coverage under 

the National Flood Insurance Act, and for other purposes, having 

considered the same, report favorably thereon with an amendment 

and recommend that the bill as amended do pass. 

The amendment is as follows: 

Strike all after the enacting clause and insert the following: 

SECTION 1. USE OF REPLACEMENT COST IN DETERMINING PREMIUM RATES. 

(a) STUDY OF RISK RATING REDESIGN FLOOD INSURANCE PREMIUM RATING OPTIONS.— 

(1) STUDY.—The Administrator of the Federal Emergency Management Agency shall conduct a study to— 

(A) evaluate insurance industry best practices for risk rating and classification, including practices related to replacement cost value in premium 

rate estimations; 

(B) assess options, methods, and strategies for including replacement cost 

value in the Administrator’s estimates under section 1307(a)(1) of the National Flood Insurance Act of 1968 (42 U.S.C. 4014(a)(1)); 

(C) provide recommendations for including replacement cost value in the 

estimate of the risk premium rates for flood insurance under such section 

1307(a)(1); 

(D) identify an appropriate methodology to incorporate replacement cost 

value into the Administrator’s estimates under such section 1307(a)(1); 

(E) develop a feasible implementation plan and projected timeline for including replacement cost value in the estimates of risk premium rates for 


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flood insurance made available under the National Flood Insurance Program. 

(2) REPORT.— 

(A) REQUIREMENT.—Not later than the expiration of the 12-month period 

beginning on the date of the enactment of this Act, the Administrator shall 

submit to the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the 

Senate a report that contains the results and conclusions of the study required under paragraph (1). 

(B) CONTENTS.—The report submitted under subparagraph (A) shall include— 

(i) an analysis of the recommendations resulting from the study 

under paragraph (1) and any potential impacts on the National Flood 

Insurance Program, including cost considerations; 

(ii) a description of any actions taken by the Administrator to implement the study recommendations; and 

(iii) a description of any study recommendations that have been deferred or not acted upon, together with a statement explaining the reasons for such deferral or inaction. 

(b) USE OF REPLACEMENT COST VALUE IN PREMIUM RATES; IMPLEMENTATION.— 

(1) ESTIMATED RATES.—Paragraph (1) of section 1307(a) of the National Flood 

Insurance Act of 1968 (42 U.S.C. 4014(a)(1)) is amended, in the matter preceding subparagraph (A), by inserting after ‘‘flood insurance’’ the following: ‘‘, 

which shall incorporate replacement cost value, and’’. 

(2) CHARGEABLE RATES.—Subsection (b) of section 1308 of the National Flood 

Insurance Act of 1968 (42 U.S.C. 4015(b)) is amended, in the matter preceding 

paragraph (1), by inserting after ‘‘Such rates’’ the following: ‘‘shall incorporate 

replacement cost value and’’. 

(3) EFFECTIVE DATE.—The amendments under paragraphs (1) and (2) of this 

subsection shall be made upon the expiration of the 12-month period beginning 

on the date of the enactment of this Act. 

(4) APPLICABILITY AND PHASE-IN.—The Administrator of the Federal Emergency Management Agency shall apply the amendments under paragraphs (1) 

and (2) to flood insurance coverage made available under the National Flood Insurance Act of 1968 for properties located in various geographic regions in the 

United States such that— 

(A) over the period beginning upon the expiration of the period referred 

to in paragraph (3) of this subsection and ending on December 31, 2020, 

the requirement under such amendments shall be gradually phased in geographically throughout the United States as sufficient information for such 

implementation becomes available; and 

(B) after the expiration of such period referred to in subparagraph (A), 

such amendments shall apply to all flood insurance coverage made available under the National Flood Insurance Act of 1968. 

PURPOSE AND SUMMARY

Introduced by Representative Blaine Luetkemeyer on May 19, 

2017, H.R. 2565 would require the use of replacement cost value 

in determining the premium rates for flood insurance coverage 

under the National Flood Insurance Act, and for other purposes, 

would require the Federal Emergency Management Agency 

(FEMA) to conduct a study on the feasibility of incorporating the 

actual replacement cost value for each National Flood Insurance 

Program covered property. Additionally, H.R. 2565 amends the National Flood Insurance Act of 1968 to require FEMA to use actual 

replacement cost values as part of the determination of chargeable 

risk premiums. 

BACKGROUND AND NEED FOR LEGISLATION

Floods are among the most frequently occurring and costly natural disasters. Most declarations of federal disasters by the Federal 

Emergency Management Agency (FEMA) are related to flooding. 

Yet despite the frequency and severity of losses that result from 


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flooding, the private insurance market generally did not provide insurance for flooding; when it did, insurance for flood-related damage can be expensive because the properties most at-risk tend to 

be highly concentrated geographically and the potential risk of economic losses is extremely high. 

To supplement the availability of flood insurance in the private 

market, Congress, in 1968, created the National Flood Insurance 

Program (NFIP), which is administered by FEMA and provides 

flood insurance to approximately 5.1 million policyholders across 

the country. In exchange for premiums paid by policyholders, NFIP 

makes federally backed flood insurance available to homeowners 

and other property owners (for example, businesses, churches, and 

farmers) in these communities. 

Homeowners with mortgages held by federally regulated lenders 

on property in participating communities identified by FEMA to be 

in Special Flood Hazard Areas are required to purchase flood insurance (mandatory purchase requirement). NFIP coverage limits vary 

by program (regular or emergency) and property type (for example, 

residential or nonresidential). In NFIP’s regular program, the maximum coverage limits for residential policyholders are $250,000 for 

buildings and $100,000 for contents. For commercial policyholders 

(that is, those with policies for nonresidential properties), the maximum coverage limit is $500,000 per building and $500,000 for contents owned by the building owner. There is additional coverage for 

contents owned by the tenants. 

Residents and business owners in over 22,000 participating communities across the United States and its territories are able to 

buy NFIP flood insurance policies through insurance agents and 

companies that participate as third-party administrators in the 

‘‘Write Your Own’’ (WYO) program. The WYO program allows private insurance carriers to issue and service government underwritten and taxpayer backed NFIP policies with no private financial liability from the insurer. Insurance companies that participate 

in the WYO program receive an expense allowance for policies they 

write and the claims they process. In addition, their agents earn 

a commission for the policies they sell. The federal government, 

however, retains responsibility for managing the risk and paying 

claims, as well as covering any litigation costs should a WYO insurer be sued in court. 

Property owners can purchase flood insurance through the NFIP 

only if their communities participate in the NFIP. To participate in 

the NFIP, a community must agree to abide by certain statutory 

provisions intended to mitigate the risk of flooding, such as building codes that require new structures built in floodplains (high-risk 

areas) to be protected against flooding or to be elevated above the 

100-year floodplain. 

As of June 5, 2017, the NFIP has an outstanding debt of $24.6 

billion borrowed from taxpayers, with roughly $1.1 billion available 

cash-on-hand and $5.825 billion remaining of its total temporary 

$30.425 billion Treasury borrowing authority. The NFIP’s debt results primarily from its borrowing to pay claims relating to the 

Gulf Coast hurricanes in 2005 and Superstorm Sandy in October 

2012. This borrowing stems from a structural imbalance in how the 

NFIP measures and prices for risk, resulting in only 46 percent of 

premium dollars collected in 2016 being available for the payments 


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of claims. With such a low portion of premiums available to pay 

claims, the pressure on the NFIP to borrow from taxpayers increases. The NFIP’s structural budget crisis has required periodic 

legislation to increase its borrowing authority, the most recent example of which occurred in January 2013 when Congress increased 

the NFIP’s borrowing authority by $9.7 billion—from $20.725 billion to its current $30.425 billion level. 

H.R. 2565 would require FEMA to conduct a study to evaluate 

insurance industry best practices for risk rating and classification, 

including practices related to replacement cost value in premium 

rate estimation. Upon submission of the study to Congress, the bill 

requires FEMA to incorporate up-to-date replacement cost values, 

by structure, when calculating annual chargeable premium rates, 

as opposed to the current practice that relied upon a national average, over a 1–3 year period. 

In FEMA’s documents that outline the methods used to develop 

flood insurance premiums, the agency states that it does not consider actual replacement costs when it determines NFIP premiums. 

Instead, the NFIP uses fixed national averages for replacement 

costs when it determines customer premiums. By using fixed replacement values based on historical averages, the NFIP’s current 

premium construction process guarantees that the lower-income 

policyholders will subsidize wealthier homeowners, because policyholders below the average would pay up to that national average 

and policyholders above the average (higher income policyholders) 

would pay down to that national average. 

H.R. 2565 fixes this inequity and provides relief to lower-income 

policyholders by requiring the NFIP to incorporate up-to-date replacement cost values, by structure, when calculating annual 

chargeable premium rates, as opposed to the current practice that 

relies upon a national average. 

HEARINGS

The Committee on Financial Services’ Subcommittee on Housing 

& Insurance held two hearings examining matters relating to H.R. 

2565 on March 9, 2017 and March 16, 2017. The Committee on Financial Services held a hearing examining matters relating to H.R. 

2565 on June 7, 2017. 

COMMITTEE CONSIDERATION

The Committee on Financial Services met in open session on 

June 15, 2017 to consider H.R. 2565. The Committee ordered H.R. 

2565 to be reported favorably to the House, as amended, by a recorded vote of 34 ayes and 25 nays (Recorded vote no. FC–66), a 

quorum being present. Before the motion to report was offered, the 

Committee adopted an amendment offered by Mr. Luetkemeyer, by 

voice vote, a quorum being present. 

COMMITTEE VOTES

Clause 3(b) of rule XIII of the Rules of the House of Representatives requires the Committee to list the record votes on the motion 

to report legislation and amendments thereto. The sole recorded 

vote was on a motion by Chairman Hensarling to report the bill, 

as amended, favorably to the House. The motion was agreed to by 


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a recorded vote of 34 ayes and 25 nays (Recorded vote no. FC–66), 

a quorum being present. 


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COMMITTEE OVERSIGHT FINDINGS

Pursuant to clause 3(c)(1) of rule XIII of the Rules of the House 

of Representatives, the findings and recommendations of the Committee based on oversight activities under clause 2(b)(1) of rule X 

of the Rules of the House of Representatives, are incorporated in 

the descriptive portions of this report. 

PERFORMANCE GOALS AND OBJECTIVES

Pursuant to clause 3(c)(4) of rule XIII of the Rules of the House 

of Representatives, the Committee states that H.R. 2565 will protect taxpayers and policyholders by incorporating up-to-date replacement cost values, by structure, when calculating annual 

chargeable premium rates. 

NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, AND TAX

EXPENDITURES

In compliance with clause 3(c)(2) of rule XIII of the Rules of the 

House of Representatives, the Committee adopts as its own the estimate of new budget authority, entitlement authority, or tax expenditures or revenues contained in the cost estimate prepared by 

the Director of the Congressional Budget Office pursuant to section 

402 of the Congressional Budget Act of 1974. 

COMMITTEE COST ESTIMATE

The Committee adopts as its own the cost estimate prepared by 

the Director of the Congressional Budget Office pursuant to section 

402 of the Congressional Budget Act of 1974. 

CONGRESSIONAL BUDGET OFFICE ESTIMATES

Pursuant to clause 3(c)(3) of rule XIII of the Rules of the House 

of Representatives, the following is the cost estimate provided by 

the Congressional Budget Office pursuant to section 402 of the 

Congressional Budget Act of 1974: 

U.S. CONGRESS, CONGRESSIONAL BUDGET OFFICE, Washington, DC, July 14, 2017. 

Hon. JEB HENSARLING, Chairman, Committee on Financial Services, 

House of Representatives, Washington, DC. 

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 2565, a bill to require the 

use of replacement cost value in determining the premium rates for 

flood insurance coverage under the National Flood Insurance Act, 

and for other purposes. 

If you wish further details on this estimate, we will be pleased 

to provide them. The CBO staff contact is Robert Reese. 

Sincerely, 

MARK P. HADLEY

(For Keith Hall). 

Enclosure. 


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H.R. 2565—A bill to require the use of replacement cost value in determining the premium rates for flood insurance coverage under 

the National Flood Insurance Act, and for other purposes 

Summary: H.R. 2565 would direct the Federal Emergency Management Agency (FEMA) to analyze different methods and develop 

a plan for incorporating the actual replacement cost of each structure insured by the National Flood Insurance Program (NFIP) into 

the premium charged to each property owner. The bill also would 

require FEMA to submit the plan and an analysis of any alternative plans it considered to the Congress. FEMA would then be 

required to phase in its plan over a three-year period. 

CBO estimates that implementing H.R. 2565 would cost $15 million over the 2018–2022 period, assuming appropriation of the necessary amounts. CBO estimates that enacting the legislation would 

affect direct spending; therefore, pay-as-you-go procedures apply. 

However, those effects would not be significant. Enacting the bill 

would not affect revenues. 

CBO estimates that enacting H.R. 2565 would not increase net 

direct spending or on-budget deficits in any of the four consecutive 

10-year periods beginning in 2028. 

H.R. 2565 contains no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act (UMRA) 

and would not affect the budgets of state, local, or tribal governments. 

Estimated cost to the Federal Government: The estimated budgetary effect of H.R. 2565 is shown in the following table. The costs 

of this legislation fall within budget function 450 (community and 

regional development). 

By fiscal year, in millions of dollars— 

2017 2018 2019 2020 2021 2022 2017– 

2022 

INCREASES IN SPENDING SUBJECT TO APPROPRIATION 

Estimated Authorization Level ............................................................... 0 3 3 3 3 3 15 

Estimated Outlays .................................................................................. 0 3 3 3 3 3 15 

Basis of estimate: For this estimate, CBO assumes that H.R. 

2565 will be enacted near the end of fiscal year 2017 and that the 

necessary amounts will be appropriated each year. Estimated outlays are based on historical spending patterns for similar programs. 

NFIP policies are available to insure up to $250,000 of the value 

of residential properties or up to $500,000 of the value of nonresidential properties. In general, properties with a greater replacement value incur more costly flood claims than those with smaller 

replacement values—even when those properties face the same risk 

of flooding. However, properties that face the same flood risk are 

charged the same premium even if the replacement value of those 

structures is significantly different. Under current law, FEMA accounts for the different replacement value of structures with NFIP 

policies by incorporating an under-insurance adjustment factor. 

That adjustment factor is applied to all NFIP premiums such that 

premiums are sufficient to cover expected claims. 

Under H.R. 2565, FEMA would be required to develop and implement a plan to incorporate the replacement value of each indiVerDate Sep 11 2014 06:05 Jul 21, 2017 Jkt 069006 PO 00000 Frm 00008 Fmt 6659 Sfmt 6602 E:\HR\OC\HR221.XXX HR221

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vidual insured structure into the premium charged to the owner of 

that structure. That would change the methodology for determining 

the adjustment factor for replacement values: instead of using an 

average factor to adjust all policies, FEMA would be required to 

calculate and use a specific adjustment factor for each individual 

policy based on its coverage premiums and the replacement value 

of the individual structure. 

CBO expects the changes required under H.R. 2565 would not 

significantly alter the total amount of premiums collected from 

NFIP policyholders in any year. Rather, the changes would adjust 

some policyholders’ premiums upward and other policyholders’ premiums downward such that the total premium collections would remain about the same as they otherwise would be under current 

law. 

According to FEMA, the agency is already preparing to determine how to incorporate replacement cost value into premiums as 

a part of a larger effort to redesign premiums for the NFIP. Based 

on an analysis of information from by FEMA, CBO estimates that 

implementing H.R. 2565 would cost $15 million over the 2018–2022 

period to obtain additional data from policyholders to complete the 

redesign of NFIP premiums and incorporate replacement values for 

each policy. 

Pay-as-you-go considerations: The Statutory Pay-As-You-Go Act 

of 2010 establishes budget-reporting and enforcement procedures 

for legislation affecting direct spending or revenues. Because using 

a specific under-insurance adjustment factor for each individual 

NFIP policy rather than an average adjustment factor for all policies would not affect the total NFIP premiums collected, CBO expects that enacting H.R. 2565 would have no significant effect on 

direct spending in any year. Enacting the bill would not affect revenues. 

Increase in long-term direct spending and deficits: CBO estimates that enacting H.R. 2565 would not increase net direct spending or on-budget deficits in any of the four consecutive 10-year periods beginning in 2028. 

Intergovernmental and private-sector impact: H.R. 2565 contains 

no intergovernmental or private-sector mandates as defined in 

UMRA and would not affect the budgets of state, local, or tribal 

governments. 

Estimate prepared by: Federal costs: Robert Reese; Impact on 

state, local, and tribal governments: Rachel Austin; Impact on the 

private sector: Logan Smith. 

Estimate approved by: H. Samuel Papenfuss, Deputy Assistant 

Director for Budget Analysis. 

FEDERAL MANDATES STATEMENT

The Committee adopts as its own the estimate of Federal mandates prepared by the Director of the Congressional Budget Office 

pursuant to section 423 of the Unfunded Mandates Reform Act. 

ADVISORY COMMITTEE STATEMENT

No advisory committees within the meaning of section 5(b) of the 

Federal Advisory Committee Act were created by this legislation. 


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APPLICABILITY TO LEGISLATIVE BRANCH

The Committee finds that the legislation does not relate to the 

terms and conditions of employment or access to public services or 

accommodations within the meaning of the section 102(b)(3) of the 

Congressional Accountability Act. 

EARMARK IDENTIFICATION

H.R. 2565 does not contain any congressional earmarks, limited 

tax benefits, or limited tariff benefits as defined in clause 9 of rule 

XXI. 

DUPLICATION OF FEDERAL PROGRAMS

Pursuant to section 3(c)(5) of rule XIII, the Committee states 

that no provision of H.R. 2565 establishes or reauthorizes a program of the Federal Government known to be duplicative of another Federal program, a program that was included in any report 

from the Government Accountability Office to Congress pursuant to 

section 21 of Public Law 111–139, or a program related to a program identified in the most recent Catalog of Federal Domestic Assistance. 

DISCLOSURE OF DIRECTED RULEMAKING

Pursuant to section 3(i) of H. Res. 5, 115th Cong. (2017), the 

Committee states that H.R. 2565 contains no directed rulemaking. 

SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION

Sec. 1 Use of replacement cost in determining premium rates 

The Administrator shall conduct a study to evaluate insurance 

industry best practices for risk rating and classification, including 

practices related to replacement cost value in premium rate estimations and developing a feasible implementation plan and projected timeline for including replacement costs value in the estimates of risk premium rates for flood insurance made available 

under the NFIP. Effective twelve months after the bill’s enactment, 

the Administrator shall submit to Congress a report that contains 

the results and conclusions of the study. The report shall include 

an analysis of the recommendations resulting from the study and 

any potential impacts on the NFIP; a description of any actions 

taken by the Administrator to implement the study recommendations; and a description of any study recommendations that have 

been deferred or not acted upon. This section also requires the Administrator to incorporate up-to-date replacement cost values, by 

structure, when calculating annual chargeable premium rates, as 

opposed to the current practice that relied upon a national average, 

over a 1–3 year period. 

CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

In compliance with clause 3(e) of rule XIII of the Rules of the 

House of Representatives, changes in existing law made by the bill, 

as reported, are shown as follows (new matter is printed in italics 

and existing law in which no change is proposed is shown in 

roman): 


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NATIONAL FLOOD INSURANCE ACT OF 1968 

* * * * * * * 

TITLE XIII—NATIONAL FLOOD INSURANCE 

* * * * * * * 

CHAPTER I—THE NATIONAL FLOOD INSURANCE PROGRAM 

* * * * * * * 

ESTIMATES OF PREMIUM RATES

SEC. 1307. (a) The Administrator is authorized to undertake and 

carry out such studies and investigations and receive or exchange 

such information as may be necessary to estimate, and shall from 

time to time estimate, on an area, subdivision, or other appropriate 

basis— 

(1) the risk premium rates for flood insurance, which shall 

incorporate replacement cost value, and which— 

(A) based on consideration of— 

(i) the risk involved and accepted actuarial principles; and 

(ii) the flood mitigation activities that an owner or 

lessee has undertaken on a property, including differences in the risk involved due to land use measures, 

floodproofing, flood forecasting, and similar measures, 

and 

(B) including— 

(i) the applicable operating costs and allowances set 

forth in the schedules prescribed under section 1311 

and reflected in such rates, 

(ii) any administrative expenses (or portion of such 

expenses) of carrying out the flood insurance program 

which, in his discretion, should properly be reflected in 

such rates, 

(iii) any remaining administrative expenses incurred 

in carrying out the flood insurance and floodplain 

management programs (including the costs of mapping 

activities under section 1360) not included under 

clause (ii), which shall be recovered by a fee charged 

to policyholders and such fee shall not be subject to 

any agents’ commissions, company expense allowances, or State or local premium taxes, and 

(iv) all costs, as prescribed by principles and standards of practice in ratemaking adopted by the American Academy of Actuaries and the Casualty Actuarial 

Society, including— 

(I) an estimate of the expected value of future 

costs, 

(II) all costs associated with the transfer of risk, 

and 

(III) the costs associated with an individual risk 

transfer with respect to risk classes, as defined by 

the Administrator, 


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would be required in order to make such insurance available 

on an actuarial basis for any types and classes of properties for 

which insurance coverage is available under section 1305(a) (or 

is recommended to the Congress under section 1305(b)); 

(2) the rates, if less than the rates estimated under paragraph (1), which would be reasonable, would encourage prospective insureds to purchase flood insurance, and would be 

consistent with the purposes of this title, and which, together 

with a fee charged to policyholders that shall not be not subject 

to any agents’ commission, company expenses allowances, or 

State or local premium taxes, shall include any administrative 

expenses incurred in carrying out the flood insurance and 

floodplain management programs (including the costs of mapping activities under section 1360), except that the Administrator shall not estimate rates under this paragraph for— 

(A) any residential property which is not the primary 

residence of an individual; 

(B) any severe repetitive loss property; 

(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; or 

(E) any property which on or after the date of enactment 

of the Biggert-Waters Flood Insurance Reform Act of 2012 

has experienced or sustained— 

(i) substantial damage exceeding 50 percent of the 

fair market value of such property; or 

(ii) substantial improvement exceeding 50 percent of 

the fair market value of such property; and 

(3) the extent, if any, to which federally assisted or other 

flood protection measures initiated after the date of the enactment of this title affect such rates. 

(b) In carrying out subsection (a), the Administrator shall, to the 

maximum extent feasible and on a reimbursable basis, utilize the 

services of the Department of the Army, the Department of the Interior, The Department of Agriculture, the Department of Commerce, and the Tennessee Valley Authority, and, as appropriate, 

other Federal departments or agencies, and for such purposes may 

enter into agreements or other appropriate arrangements with any 

persons. 

(c) The Administrator shall give priority to conducting studies 

and investigations and making estimates under this section in 

those States or areas (or subdivisions thereof) which he has determined have evidenced a positive interest in securing flood insurance coverage under the flood insurance program. 

(d) Notwithstanding any other provision of law, any structure existing on the date of enactment of the Flood Disaster Protection Act 

of 1973 and located within Avoyelles, Evangeline, Rapides, or Saint 

Landry Parish in the State of Louisiana, which the Administrator 

determines is subject to additional flood hazards as a result of the 

construction or operation of the Atchafalaya Basin Levee System, 

shall be eligible for flood insurance under this title (if and to the 

extent it is eligible for such insurance under the other provisions 


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of this title) at premium rates that shall not exceed those which 

would be applicable if such additional hazards did not exist. 

(e) Notwithstanding any other provision of law, any community 

that has made adequate progress, acceptable to the Administrator, 

on the construction or reconstruction of a flood protection system 

which will afford flood protection for the one-hundred-year frequency flood as determined by the Administrator, shall be eligible 

for flood insurance under this title (if and to the extent it is eligible 

for such insurance under the other provisions of this title) at premium rates not exceeding those which would be applicable under 

this section if such flood protection system had been completed. 

The Administrator shall find that adequate progress on the construction or reconstruction of a flood protection system, based on 

the present value of the completed flood protection system, has 

been made only if: (1) 100 percent of the cost of the system has 

been authorized; (2) at least 60 percent of the cost of the system 

has been appropriated; (3) at least 50 percent of the cost of the system has been expended; and (4) the system is at least 50 percent 

completed.Notwithstanding any other provision of law, in determining whether a community has made adequate progress on the 

construction, reconstruction, or improvement of a flood protection 

system, the Administrator shall consider all sources of funding, including Federal, State, and local funds. 

(f) Notwithstanding any other provision of law, this subsection 

shall apply to riverine and coastal levees that are located in a community which has been determined by the Administrator of the 

Federal Emergency Management Agency to be in the process of restoring flood protection afforded by a flood protection system that 

had been previously accredited on a Flood Insurance Rate Map as 

providing 100-year frequency flood protection but no longer does so, 

and shall apply without regard to the level of Federal funding of 

or participation in the construction, reconstruction, or improvement 

of the flood protection system. Except as provided in this subsection, in such a community, flood insurance shall be made available to those properties impacted by the disaccreditation of the 

flood protection system at premium rates that do not exceed those 

which would be applicable to any property located in an area of 

special flood hazard, the construction of which was started prior to 

the effective date of the initial Flood Insurance Rate Map published 

by the Administrator for the community in which such property is 

located. A revised Flood Insurance Rate Map shall be prepared for 

the community to delineate as Zone AR the areas of special flood 

hazard that result from the disaccreditation of the flood protection 

system. A community will be considered to be in the process of restoration if— 

(1) the flood protection system has been deemed restorable 

by a Federal agency in consultation with the local project sponsor; 

(2) a minimum level of flood protection is still provided to the 

community by the disaccredited system; and 

(3) restoration of the flood protection system is scheduled to 

occur within a designated time period and in accordance with 

a progress plan negotiated between the community and the 

Federal Emergency Management Agency. 


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Communities that the Administrator of the Federal Emergency 

Management Agency determines to meet the criteria set forth in 

paragraphs (1) and (2) as of January 1, 1992, shall not be subject 

to revised Flood Insurance Rate Maps that contravene the intent 

of this subsection. Such communities shall remain eligible for C 

zone rates for properties located in zone AR for any policy written 

prior to promulgation of final regulations for this section. Floodplain management criteria for such communities shall not require 

the elevation of improvements to existing structures and shall not 

exceed 3 feet above existing grade for new construction, provided 

the base flood elevation based on the disaccredited flood control 

system does not exceed five feet above existing grade, or the remaining new construction in such communities is limited to infill 

sites, rehabilitation of existing structures, or redevelopment of previously developed areas. 

The Administrator of the Federal Emergency Management Agency 

shall develop and promulgate regulations to implement this subsection, including minimum floodplain management criteria, within 

24 months after the date of enactment of this subsection. 

(g) NO EXTENSION OF SUBSIDY TO NEW POLICIES OR LAPSED POLICIES.—The Administrator 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 policy under the flood insurance program that has 

lapsed in coverage,, unless the decision of the policy holder to 

permit a lapse in flood insurance coverage was as a result of 

the property covered by the policy no longer being required to 

retain such coverage; or 

(2) any prospective insured who refuses to accept any offer 

for mitigation assistance by the Administrator (including an 

offer to relocate), including an offer of mitigation assistance— 

(A) following a major disaster, as defined in section 102 

of the Robert T. Stafford Disaster Relief and Emergency 

Assistance Act (42 U.S.C. 5122); or 

(B) in connection with— 

(i) a repetitive loss property; or 

(ii) a severe repetitive loss property. 

(h) DEFINITION.—In this section, the term ‘‘severe repetitive loss 

property’’ has the following meaning: 

(1) SINGLE-FAMILY PROPERTIES.—In the case of a property 

consisting of 1 to 4 residences, such term means a property 

that— 

(A) is covered under a contract for flood insurance made 

available under this title; and 

(B) has incurred flood-related damage— 

(i) for which 4 or more separate claims payments 

have been made under flood insurance coverage under 

this chapter, with the amount of each such claim exceeding $5,000, and with the cumulative amount of 

such claims payments exceeding $20,000; or 

(ii) for which at least 2 separate claims payments 

have been made under such coverage, with the cumulative amount of such claims exceeding the value of 

the property. 


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(2) MULTIFAMILY PROPERTIES.—In the case of a property consisting of 5 or more residences, such term shall have such 

meaning as the Director shall by regulation provide. 

ESTABLISHMENT OF CHARGEABLE PREMIUM RATES

SEC. 1308. (a) On the basis of estimates made under section 1307 

and such other information as may be necessary, the Administrator 

shall from time to time prescribe, after providing notice— 

(1) chargeable premium rates for any types and classes of 

properties for which insurance coverage shall be available 

under section 1305 (at less than the estimated risk premium 

rates under section 1307(a)(1), where necessary), and 

(2) the terms and conditions under which, and the areas (including subdivisions thereof) within which such rates shall 

apply. 

(b) Such rates shall incorporate replacement cost value and shall, 

insofar as practicable, be— 

(1) based on a consideration of the respective risks involved, 

including differences in risks due to land use measures, floodproofing, flood forecasting, and similar measures; 

(2) adequate, on the basis of accepted actuarial principles, to 

provide reserves for anticipated losses, or if less than such 

amount consistent with the objective of making flood insurance 

available where necessary at reasonable rates so as to encourage prospective insureds to purchase such insurance and with 

the purposes of this title; 

(3) adequate, together with the fee under paragraph 

(1)(B)(iii) or (2) of section 1307(a), to provide for any administrative expenses of the flood insurance and floodplain management programs (including the costs of mapping activities under 

section 1360); 

(4) stated so as to reflect the basis for such rates, including 

the differences (if any) between the estimated risk premium 

rates under section 1307(a)(1) and the estimated rates under 

section 1307(a)(2); and 

(5) adequate, on the basis of accepted actuarial principles, to 

cover the average historical loss year obligations incurred by 

the National Flood Insurance Fund. 

(c) ACTUARIAL RATE PROPERTIES.—Subject only to the limitations 

provided under paragraphs (1) and (2), the chargeable rate shall 

not be less than the applicable estimated risk premium rate for 

such area (or subdivision thereof) under section 1307(a)(1) with respect to the following properties: 

(1) POST-FIRM PROPERTIES.—Any property the construction or 

substantial improvement of which the Administrator determines has been started after December 31, 1974, or started 

after the effective date of the initial rate map published by the 

Administrator under paragraph (2) of section 1360 for the area 

in which such property is located, whichever is later, except 

that the chargeable rate for properties under this paragraph 

shall be subject to the limitation under subsection (e). 

(2) CERTAIN LEASED COASTAL AND RIVER PROPERTIES.—Any 

property leased from the Federal Government (including residential and nonresidential properties) that the Administrator 

determines is located on the river-facing side of any dike, levee, 


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or other riverine flood control structure, or seaward of any seawall or other coastal flood control structure. 

(d) With respect to any chargeable premium rate prescribed 

under this section, a sum equal to the portion of the rate that covers any administrative expenses of carrying out the flood insurance 

and floodplain management programs which have been estimated 

under paragraphs (1)(B)(ii) and (1)(B)(iii) of section 1307(a) or paragraph (2) of such section (including the fees under such paragraphs), shall be paid to the Administrator. The Administrator 

shall deposit the sum in the National Flood Insurance Fund established under section 1310. 

(e) ANNUAL LIMITATION ON PREMIUM INCREASES.—Except with 

respect to properties described under paragraph (2) of subsection 

(c), and notwithstanding any other provision of this title— 

(1) the chargeable risk premium rate for flood insurance 

under this title for any property may not be increased by more 

than 18 percent each year, except— 

(A) as provided in paragraph (4); 

(B) in the case of property identified under section 

1307(g); or 

(C) in the case of a property that— 

(i) is located in a community that has experienced a 

rating downgrade under the community rating system 

program carried out under section 1315(b); 

(ii) is covered by a policy with respect to which the 

policyholder has— 

(I) decreased the amount of the deductible; or 

(II) increased the amount of coverage; or 

(iii) was misrated; 

(2) the chargeable risk premium rates for flood insurance 

under this title for any properties initially rated under section 

1307(a)(2) within any single risk classification, excluding properties for which the chargeable risk premium rate is not less 

than the applicable estimated risk premium rate under section 

1307(a)(1), shall be increased by an amount that results in an 

average of such rate increases for properties within the risk 

classification during any 12-month period of not less than 5 

percent of the average of the risk premium rates for such properties within the risk classification upon the commencement of 

such 12-month period; 

(3) the chargeable risk premium rates for flood insurance 

under this title for any properties within any single risk classification may not be increased by an amount that would result 

in the average of such rate increases for properties within the 

risk classification during any 12-month period exceeding 15 

percent of the average of the risk premium rates for properties 

within the risk classification upon the commencement of such 

12-month period; and 

(4) the chargeable risk premium rates for flood insurance 

under this title for any properties described in subparagraphs 

(A) through (E) of section 1307(a)(2) 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 (3). 


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(f) ADJUSTMENT OF PREMIUM.—Notwithstanding any other provision of law, if the Administrator determines that the holder of a 

flood insurance policy issued under this Act is paying a lower premium than is required under this section due to an error in the 

flood plain determination, the Administrator may only prospectively charge the higher premium rate. 

(g) FREQUENCY OF PREMIUM COLLECTION.—With respect to any 

chargeable premium rate prescribed under this section, the Administrator shall provide policyholders that are not required to escrow 

their premiums and fees for flood insurance as set forth under section 102 of the Flood Disaster Protection Act of 1973 (42 U.S.C. 

4012a) with the option of paying their premiums annually or 

monthly. 

(h) RULE OF CONSTRUCTION.—For purposes of this section, the 

calculation of an ‘‘average historical loss year’’— 

(1) includes catastrophic loss years; and 

(2) shall be computed in accordance with generally accepted 

actuarial principles. 

(i) RATES FOR PROPERTIES NEWLY MAPPED INTO AREAS WITH SPECIAL FLOOD HAZARDS.—Notwithstanding subsection (f), the premium rate for flood insurance under this title that is purchased on 

or after the date of the enactment of this subsection— 

(1) on a property located in an area not previously designated as having special flood hazards and that, pursuant to 

any issuance, revision, updating, or other change in a flood insurance map, becomes designated as such an area; and 

(2) where such flood insurance premium rate is calculated 

under subsection (a)(1) of section 1307 (42 U.S.C. 4014(a)(1)), 

shall for the first policy year be the preferred risk premium for the 

property and upon renewal shall be calculated in accordance with 

subsection (e) of this section until the rate reaches the rate calculated under subsection (a)(1) of section 1307. 

(j) PREMIUMS AND REPORTS.—In setting premium risk rates, in 

addition to striving to achieve the objectives of this title the Administrator shall also strive to minimize the number of policies with 

annual premiums that exceed one percent of the total coverage provided by the policy. For any policies premiums that exceed this one 

percent threshold, the Administrator shall report such exceptions 

to the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs 

of the Senate. 

(k) CONSIDERATION OF MITIGATION METHODS.—In calculating the 

risk premium rate charged for flood insurance for a property under 

this section, the Administrator shall take into account the implementation of any mitigation method identified by the Administrator in the guidance issued under section 1361(d) (42 U.S.C. 

4102(d)). 

(l) CLEAR COMMUNICATIONS.—The Administrator shall clearly 

communicate full flood risk determinations to individual property 

owners regardless of whether their premium rates are full actuarial rates. 

(m) PROTECTION OF SMALL BUSINESSES, NON-PROFITS, HOUSES

OF WORSHIP, AND RESIDENCES.— 

(1) REPORT.—Not later than 18 months after the date of the 

enactment of this section and semiannually thereafter, the AdVerDate Sep 11 2014 05:20 Jul 21, 2017 Jkt 069006 PO 00000 Frm 00017 Fmt 6659 Sfmt 6602 E:\HR\OC\HR221.XXX HR221

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ministrator shall monitor and report to Committee on Financial Services of the House Representatives and the Committee 

on Banking, Housing, and Urban Affairs of the Senate, the Administrator’s assessment of the impact, if any, of the rate increases required under subparagraphs (A) and (D) of section 

1307(a)(2) and the surcharges required under section 1308A on 

the affordability of flood insurance for— 

(A) small businesses with less than 100 employees; 

(B) non-profit entities; 

(C) houses of worship; and 

(D) residences with a value equal to or less than 25 percent of the median home value of properties in the State 

in which the property is located. 

(2) RECOMMENDATIONS.—If the Administrator determines 

that the rate increases or surcharges described in paragraph 

(1) are having a detrimental effect on affordability, including 

resulting in lapsed policies, late payments, or other criteria related to affordability as identified by the Administrator, for 

any of the properties identified in subparagraphs (A) through 

(D) of such paragraph, the Administrator shall, not later than 

3 months after making such a determination, make such recommendations as the Administrator considers appropriate to 

improve affordability to the Committee on Financial Services of 

the House of Representatives and the Committee on Banking, 

Housing, and Urban Affairs of the Senate. 

* * * * * * * 


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(19) 

MINORITY VIEWS 

H.R. 2565 would require the Federal Emergency Management 

Agency (FEMA) to study and then immediately implement a 

change in the way flood insurance rates are calculated. Currently, 

FEMA uses a national average replacement value when setting 

rates. H.R. 2565 would require FEMA to instead use the specific 

replacement value of the property to be insured. While this would 

result in more precise rates for the specific property, it could result 

in higher premiums for certain properties across the country. 

The use of a national average means that, in general, policyholders with properties below the average value may be overpaying 

for flood insurance, while policyholders with properties above the 

average value may be underpaying for flood insurance. This is an 

issue that should be further studied. 

However, Congress should have the opportunity to review the results of the study to better determine exactly what the impacts will 

be if this change were enacted. At this time, it is unclear what the 

‘‘pivot point’’ at which premiums would be affected, and it is equally unclear how fast or by how much premiums would rise or fall 

as a result of this change. 

Given the broader affordability challenges associated with flood 

insurance premiums, we must be cautious in calling for changes 

that could have unintended consequences on flood insurance costs. 

If flood insurance becomes widely unaffordable, this could have 

devastating consequences on the housing market as policyholders 

lose the ability to purchase coverage, and are left unprotected in 

the event of a flood. 

For these reasons, we oppose H.R. 2565. 

MAXINE WATERS. 

MICHAEL E. CAPUANO. 

CAROLYN B. MALONEY. 

KEITH ELLISON. 

STEPHEN F. LYNCH. 

JOYCE BEATTY. 

VICENTE GONZALES. 

GWEN MOORE. 

BRAD SHERMAN. 

AL GREEN. 

EMANUEL CLEAVER. 

DANIEL T. KILDEE. 

CHARLIE CRIST. 

NYDIA VELA ́ ZQUEZ. 

GREGORY MEEKS. 

Æ 


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