Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

EIGHTEENTH CONGRESS
First Regular Session

House Bill No, _1946

Introduced by Rep. LAWRENCE LEMUEL H. FORTUN

EXPLANATORY NOTE

In the Global Climate Risk Index 2019 Briefing Paper, the Philippines has
been identified as the fifth (5t*) among the countries worldwide with the highest
weather-related losses. Consequent to the direct impact of climate change, the
extent of deaths, injuries and losses of property due to extreme weather events
are alarmingly growing each year. In a report entitled “The Human Cost of
Weather Related Disasters (1995-2015)” of the Centre for Research on the
Epidemiology of Disasters and the United Nations Office for Disaster Risk
Reduction, the Philippines has been ranked the 4% country in the world with
the highest of number of people affected by climate or weather-related disasters.

The report identifies flooding as constituting 47% of all weather-related
disasters and has affected’ 2.3 Billion people in the world and ninety-five
percent (95%) of the population in Asia. The Philippines has in recent years
been at the receiving end of floods resulting from climate-related disasters.
‘These floods severely impact on individuals, families and communities and have
devastating environmental, social and economic consequences. These
immediate impacts include injuries, loss of human lives, damage to property,
destruction of crops, damage to infrastructure, disruption of livelihoods and
industries, and serious risks to public health. :

In the last ten years, the Philippines has had the worst of flooding never
before experienced by the country. Most devastating and extremely traumatic of
them all was Typhoon Haiyan that claimed more than six thousand (6,000)
lives, injured over 200,000, and left over a thousand missing. The damage to
homes, buildings, commercial structures, roads, seaports, airports, utilities,
flood control structures, school building and other infrastructures have resulted
in a total damage cost of nearly P90 Billion.

For the aforementioned reasons, it has become imperative that a national
flood insurance program be instituted. It has become an exigency for our
population, individuals or families, especially those in the areas most
vulnerable to flooding, to have immediate access to security, protection and
indemnification that flood insurance can provide. Flooding may in most cases
be a fortuitous event or a force majeure whose devastation can be massive, but
the availability of a flood insurance can, at the very least, significantly alleviate
the sufferings of those unfortunately affected.

In view of its considerable urgency, the passage of thié bill is most
earnestly sought.



Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

EIGHTEENTH CONGRESS
First Regular Session

House Bill No. _1946

Introduced by Rep. LAWRENCE LEMUEL H. FORTUN

EXPLANATORY NOTE

In the Global Climate Risk Index 2019 Briefing Paper, the Philippines has
been identified as the fifth (5) among the countries worldwide with the highest
weather-related losses. Consequent to the direct impact of climate change, the
extent of deaths, injuries and losses of property due to extreme weather events
are alarmingly growing each year. In a report entitled “The Human Cost of
Weather Related Disasters (1995-2015)” of the Centre for Research on the
Epidemiology of Disasters and the United Nations Office for Disaster Risk
Reduction, the Philippines has been ranked the 4 country in the world with
the highest of number of people affected by climate or weather-related disasters.

‘The report identifies flooding as constituting 47% of all weather-related
disasters and has affected’ 2.3 Billion people in the world and ninety-five
percent (95%) of the population in Asia. The Philippines has in recent years
been at the receiving end of floods resulting from climate-related disasters.
These floods severely impact on individuals, families and communities and have
devastating environmental, social and economic consequences. These
immediate impacts include injuries, loss of human lives, damage to property,
destruction of crops, damage to infrastructure, disruption of livelihoods and
industries, and serious risks to public health.

In the last ten years, the Philippines has had the worst of flooding never
before experienced by the country. Most devastating and extremely traumatic of
them all was Typhoon Haiyan that claimed more than six thousand (6,000)
lives, injured over 200,000, and left over a thousand missing. The damage to
homes, buildings, commercial structures, roads, seaports, airports, utilities,
flood control structures, school building and other infrastructures have resulted
in a total damage cost of nearly P90 Billion.

For the aforementioned reasons, it has become imperative that a national
flood insurance program be instituted. It has become an exigency for our
population, individuals or families, especially those in the areas most
vulnerable to flooding, to have immediate access to security, protection and
indemnification that flood insurance can provide. Flooding may in most cases
be a fortuitous event or a force majeure whose devastation can be massive, but
the availability of a flood insurance can, at the very least, significantly alleviate
the sufferings of those unfortunately affected.

In view of its considerable urgency, the passage of thié bill is most
earnestly sought.



Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

EIGHTEENTH CONGRESS
First Regular Session

House Bill No. _1946

Introduced by Rep. LAWRENCE LEMUEL H. FORTUN

AN ACT
INSTITUTING A NATIONAL FLOOD INSURANCE PROGRAM

Section 1. Short Title. - This Act shall be known as the

“National Flood Insurance Act.”

Section 2. Declaration of Policy. - It is hereby declared the
policy of the State to promote the general welfare by providing the
property owners with government insurance protection against losses
from flooding. The insurance is an alternative to disaster assistance to
meet the escalating costs of repairing damage to residential dwellings
and other buildings together with its contents. It is in the public interest
for persons already living in flood-prone areas to have both an
opportunity to purchase flood insurance and access to more adequate
limits of coverage so that they will be indemnified for their losses in the

event of flood disasters.

Section 3. Definitions. - In this Act, the term —

(a) “Agency” means the National Flood Insurance Agency;

(b) “Agricultural commodities” means agricultural commodities and
livestock;

(c) “Agricultural structure” means any structure used exclusively
in connection with the production, harvesting, storage, raising,
or drying of agricultural commodities;

(d) “Director” means the administrator of the National Flood
Insurance Program;

(c) “Financial assistance” means any form of loan, grant, guaranty,
insurance, payment, rebate, subsidy, disaster assistance loan


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or grant, or any other form of direct or indirect assistance from
the government;

() “Financial assistance for acquisition or construction purposes”
means any form of financial assistance which is intended in
whole or in part for the acquisition, construction,
reconstruction, repair, or improvement of any publicly or
privately owned building, and for any machinery, equipment,
fixtures, and furnishings contained or be contained therein,
and shall include the purchase or subsidization of mortgage or
mortgages;

(g) “Flood insurance policy” means a flood insurance policy issued
under this Act;

(h) “Improved real estate” means a real estate upon which a
building is located;

(i) “Lender” means a lending institution or a government agency
lender;

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“Lending institution” means any bank, savings and loan
association, credit union, credit association, or similar
institution;

(k) “Program” means the National Flood Insurance Program
established under this Act; and

() “Task force” means the Flood Insurance Task Force.

Section 4, National Flood Insurance Agency. - (a) There is
hereby established National Flood Insurance Agency to administer and
implement the National Flood Insurance Program under this Act.

(b) The agency shall be headed by a Director to be appointed by

the President of the Philippines;

(c) The agency shall be an attached agency of the Department of

Finance.

Section 5. National Flood Insurance Program. - (a) There is
hereby established National Flood Insurance Program which will enable
interested persons to purchase insurance against loss resulting from
physical damage to or loss of real property or personal property related

thereto arising from any flood occurring in the Philippines.


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(b) The National Flood Insurance Program established pursuant to
subsection (a) of this section shall enable the purchase of insurance to
cover the cost of implementing measures that are consistent with land
use and control measures established by a local government unit (LGU)
for —

(1) properties that are repetitive loss structures;

(2) properties that are substantially damaged structures; and

(3) properties that sustained flood damage on multiple occasions,
if the Director determines that it is cost-effective and in the best interests
of the National Flood Insurance Fund to require the implementation of

such measures.

(c) In carrying out the flood insurance program the Director shall,
to the maximum extent practicable, encourage and arrange for (1)
appropriate financial participation and risk sharing in the program by
insurance companies and other insurers; and (2) other appropriate
participation, on other than risk-sharing basis, by insurance companies
and other insurers, insurance agents and brokers, and insurance

adjustment organization, in accordance with this Act.

Section 6. Supplemental Forms. - (a) In General - Not later
than six (6) months after the date of enactment of this Act, the Director
shall develop supplemental forms to be issued in conjunction with the
issuance of a flood insurance policy that set forth, in simple terms -

(1) the exact coverage being purchased by a policyholder;

(2) any exclusion from coverage that apply to the coverage

purchased;

(3) an explanation, including illustrations, of how lost items and
damages will be valued under the policy at the time of loss;

(4) the number and peso values of claims filed under a flood
insurance policy over the life of the property, and the effect,
under this Act, of the filing of any further claims under a flood
insurance policy with respect to that property; and

(5) any other information that the Director determines will be
helpful to policyholders in understanding the flood insurance

coverage.


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(b) Distribution - The forms developed under subsection (a) shall

be given (1) all holders of a food insurance policy at the time of

purchase and renewal; and (2) insurance companies and agents

that are authorized to sell flood insurance policies.

Section 7. Acknowledgement Form. - (a) In General. — Not later

than six (6) months after the date of enactment of this Act, the Director

shall develop an acknowledgment form to be signed by the purchaser of a

flood insurance policy that contains -

ay

Q)

An acknowledgment that the purchaser has received a
copy of the standard flood insurance policy, and any
forms developed under section 5; and

An acknowledgment that the purchaser has been told
that the contents of a property or dwelling are not covered
under the terms of the standard flood insurance policy,
and that the policyholder has the option to purchase
additional coverage for such contents.

(b) Distribution - Copies of an acknowledgment form to be signed

by the purchaser and the Director.

Section 8. Flood Insurance Claims Handbook. - (a) In

General. - Not later than six (6) months after the date of enactment of

this Act, the Director shall develop a flood insurance claims handbook

that contains —

(1) an acknowledgement that the purchaser has received a
copy of the standard flood insurance policy, and any
forms developed under section 5; and

(2) an acknowledgement that the purchaser has been told
that the contents of a property or dwelling are not
covered under the terms of the standard flood insurance
policy, and that the policyholder has the option to

purchase additional coverage for such contents.

(b) Distribution - The handbook developed under subsection (a)

shall be made available to —

Q)

each insurance company and agent authorized to sell flood

insurance policies;

and


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(2) each purchaser, at the time of purchase and renewal, of a flood
insurance policy, and at the time of any flood loss sustained by

such purchaser.

SECTION 9. Appeal of Decisions Relating to Flood Insurance
Coverage. - Not later than six (6) months after the date of enactment of
this Act, the Director shall, by regulation, establish an appeals process
through which holders of a flood insurance policy may appeal the
decision, with respect to claims, proofs of loss, and loss estimates
relating to such flood insurance policy, of (a) any insurance agent or
adjuster, or insurance company; or (2) any employee of the National

Flood Insurance Agency.

Section 10. Study and Report on Use of Cost Compliance
Coverage. - Not later than one (1) year after the date of enactment of
this Act, the Director shall submit to Congress a report that sets forth —

(a) The use of cost of compliance coverage under this Act in
connection with flood insurance policies;

(b) Any barriers to policyholders using the funds provided by cost
of compliance coverage pursuant to this Act under a flood
insurance policy, and recommendations to address those
barriers; and

(c

The steps that the agency has taken to ensure that funds paid
for cost of compliance coverage under this Act are being used
to lessen the burdens on all homeowners and the Program.

Section 11. Minimum Training and Education Requirements.
- The Director shall, in cooperation with the Insurance Commissioner,
the insurance industry, and other interested parties -

(a) Establish minimum training and — education
requirements for all insurance agents who sell flood
insurance policies; and

(b) Not later than six (6) months after the date of enactment
of this Act, publish these requirements in a newspaper
of general circulation, and inform insurance companies

and agents of the requirements.


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Section 12. COA Study and Report. - (a) The Commission on
Audit shall conduct a study of -
(1) the adequacy of the scope of coverage provided under
flood insurance policies in meeting the intended goal of
Congress that flood victims be restored to their pre-flood
conditions, and any recommendations to ensure that goal
is being met;
(2

the adequacy of payments to flood victims under flood
insurance policies; and
(3)

the practices of the National Flood Insurance Agency and

insurance adjusters in estimating losses incurred during

a flood, and how such practices affect the adequacy of

payments to flood victims.

(b) Not later than one (1) year after the date of enactment of this
Act, and every three (3) years thereafter, the Commission on
Audit shall submit to Congress a report regarding the results of

the study under subsection (a).

Section 13. Flood Insurance Interagency Task Force. - (a)
‘There is hereby established an interagency task force to be known as the
Flood Insurance Task Force.

(b) The Task Force shall be composed of ten (10) members to be
appointed by the President. The members shall be the representatives
from the:

(1) Office of the President;

(2

(3)

(4)

(ts)

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(7) Government Service Insurance System;

(8)

(9) Home Development Mutual Fund; and

Insurance Commission;

National Flood Insurance Agency;

National Economic Development Authority;

National Housing Authority;

National Disaster Coordinating Council;

Social Security System;

(10) A State University.


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(c) Members of the Task Force shall be designated for membership
on the Task Force by reason of demonstrated knowledge and competence
regarding the National Flood Insurance Program.

(d) The Task Force shall carry out the following duties:

(1) Make recommendations to government agencies regarding
establishment or adoption of standardized enforcement
procedures among such agencies responsible for enforcing
compliance with the requirements under the National Flood
Insurance Program to ensure fullest possible compliance with
such requirements.

(2

Conduct a study of the extent to which government agencies
and the private sector can provide assistance in ensuring
compliance with the requirements under the national flood
insurance program and submit to the Congress a report
describing the study and any conclusions.

3)

Develop recommendations regarding enforcement and
compliance procedures, based on the studies and findings of
the Task Force, and publish such recommendations.

(e) Members of the Task Force shall receive no additional pay by
reason of the service on the Task Force.

() The members of the Task Force shall elect one member as
chairperson of the Task Force.

(g) The Task Force shall meet at the call of the chairperson or a
majority of the members of the Task Force and may take action by a vote
of the majority of the members. The Director of the National Flood
Insurance Agency shall coordinate and call the initial meeting of the Task
Force.

(h) The chairperson of the Task Force may appoint any officers to
carry out the duties of the Task Force under this Act.

(i) Upon request of the chairperson of the Task Force, the head of
any government department or agency may detail, on a temporary basis,
and of the personnel of such department or agency to the Task Force to
assist the Task Force in carrying out its duties under this section.

() In carrying out this section, the Task Force may hold hearing,
sit and act at times and places, take testimony, receive evidence and
assistance, provide information, and conduct research as the Task Force

considers appropriate.


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Section 14, Scope of Program and Priorities. - (a) In carrying
out the flood insurance program the Director shall afford a priority to
making flood insurance available to cover residential properties which
are designed for the occupancy of from one to four families, small farms,
properties of cooperatives, and business properties which are owned or
leased and operated by small business concerns.

(b) If the Director determines that it should be feasible to extend
the flood insurance program to cover other properties, such action under
this section as from time to time may be necessary in order to make flood
insurance available to cover, on such basis as may be feasible, any types
and classes of (1) other residential properties; (2) other business
properties; (3) other agricultural properties; (4) properties occupied by a
private nonprofit organizations; (5) church properties; and (6) properties
owned by the State and local governments. Any such extension of the
program to any types of classes of these properties shall from time to
time be prescribed in regulations.

(c) The Director shall make flood insurance available in only those
local government units which he or she has determined to have (1)
evidenced a positive interest in securing flood insurance coverage under
the flood insurance program; and (2) given satisfactory assurance that
before two (2) years after the effectivity of this Act, adequate land use and
control measures will have been adopted for the local government unit
which are consistent with the provisions of this Act, and that the
application and enforcement of such measures will commence as soon as
technical information on floodways and on controlling flood elevations is

available from the proper government agencies.

Section 15. Flood Insurance Purchase and Compliance
Requirements. - (a) After the expiration of sixty (60) days following three
(3) years from the effectivity of this Act, no government officer or agency
shall approve any financial assistance for acquisition or construction
purposes for use in any area that has been identified by the Director as
an area having special flood hazards and in which the sale of flood
insurance has been made available under the National Flood Insurance
Program, unless the building and any personal property to which such

financial assistance relates is covered by flood insurance in an amount at


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least equal to its development or project cost (less estimated land cost) or
to the maximum limit of coverage made available with respect to the
particular type of property under the program, whichever is less;
Provided, That if the financial assistance provides is in the form of a loan
or an insurance or guaranty of a loan, the amount of flood insurance
required need not exceed the outstanding principal balance of the loan
and need not be required beyond the term of the loan. The requirement
of maintaining flood insurance shall apply during the life of the property,
regardless of transfer of such property.

(b) Notwithstanding the other provisions of this section, flood
insurance shall not be required on any property owned by a local
government unit that is covered under an adequate policy of self-
insurance satisfactory to the Director. The Director shall publish and
periodically revise the list of local government units to which this
subsection applies.

(c) Notwithstanding any other provisions of this section,
subsections (a) and (b) shall not apply to any loan having (1) an original
outstanding principal balance of one hundred thousand (P100,000.00) or
less; and (2) a repayment term of one (1) year or less.

(d) If, at the time of origination or at any time during the term of a
loan secured by improved real estate located in an area that has been
identified by the Director (at the time of the organization of the loan or at
any time during the term of the loan) as an area having special flood
hazards and in which flood insurance is available under the National
Flood Insurance Program, the lender or servicer for the loan determined
that the building and any personal property securing the loan is not
covered by flood insurance or is covered by such insurance in an amount
less than the amount required for the property pursuant to subsection
(a), the lender or servicer shall notify the borrower under the loan that
the borrower should obtain, at the borrower’s expense, an amount of
flood insurance for the building and such personal property that is not
less than the amount under the subsection (1) of this section, for the
term of the loan.

(e) If the borrower fails to purchase such flood insurance within
forty-five (45) days after notification under subsection (e), the lender or
servicer for the loan shall purchase the insurance on behalf of the

borrower and may charge the borrower for the cost of premium and feed


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incurred by the lender or servicer for the loan in purchasing the
insurance.

() The borrower and lender for a loan secured by improved real
estate may jointly request the Director to review a determination of
whether the building is located in an area having special flood hazards.
Such request shall be supported by technical information relating to the
improved real estate. Not later than forty-five (45) days after the Director
receives the request, the Director shall review the determination and
provide to the borrower and the lender with a notice stating whether or
not the building is in an area having special flood hazards. The
determination of the Director shall be final.

(g) Any person to whom a borrower provides a notice issued by the
Director pursuant to subsection (f), stating that the building securing the
loan of the borrower is not in an area having special flood hazards, shall
have no obligation under this section to require the purchase of flood
insurance for such building during the period determined by the
Director, which shall be specified in the notice and shall begin on the
date on which such notice is provided.

(h) If a request under subsection (f) is made in connection with
the origination of a loan and the Director fails to provide the notice before
the expiration of the forty-five (45) day period, no person shall have an
obligation under this section to require the purchase of flood insurance

for the building securing the loan until such letter is provided.

Section 16. Nature and Limitation of Insurance Coverage. -
(a) The Director shall from time to time, after public consultation,
provide by regulation for general terms and conditions of insurability
which shall be applicable to properties eligible for flood insurance
coverage, including -

(1) The types, classes, and location of any such properties
which shall be eligible for flood insurance;

(2) The nature and limits of loss or damage in any areas (or
subdivisions thereof) which may be covered by such
insurance;

(3) The classification, limitation, and rejection of any risks
which may be advisable;

(4) Appropriate minimum premiums;


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(5) Appropriate loss-deductibles; and

(6) Any other terms and conditions relating to insurance
coverage or exclusion which may be necessary to carry
out the purposes of this Act.

(b) In addition to any other terms and conditions under subsection

(a) of this section, such regulations shall provide that -
(1) Any flood insurance coverage shall not exceed -
(i) In the case of residential properties —

(A) Two million pesos (P2,000,000.00) for any single-family
dwelling, and five million (P5,000,000.00) for any residential
structure containing more than one dwelling unit; and

(B) Three hundred thousand pesos (P300,000.00) aggregate
liability for dwelling unit for any contents related to such unit.

(ii) In the case of business properties which are owned or leased
and operated by small business concerns, an aggregate liability
with respect to any single structure, including any contents thereof
related to premises of small business occupants (as that term is
defined by the Director), which shall be equal to Five million pesos
(P5,000,000.00) plus five million pesos (P5,000,000.00) multiplied
by the number of such occupants and shall be allocated among
such occupants (or among the occupant or occupants and the
owner) under regulations prescribed by the Director; except that
the aggregate liability for the structure itself may in no case exceed
Five million pesos (P5,000,000.00); and

(iii) In the case of small farms and any other properties which
may become eligible for flood insurance under this Act, Two Million
pesos (P2,000,000.00) aggregate liability.

Section 17. Dissemination of Flood Insurance Information. -
The Director shall from time to time take such action as may be
necessary in order to make information and data available to the public,
and to any government agency or official, with regard to (a) the flood
insurance program, its coverage and objectives and (2) estimated and

chargeable flood insurance premium rates.

Section 18. Land Use Controls by Local Governments. - (a)

After five (5) years from the effectivity of this Act, no new flood insurance


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coverage shall be provided under this Act in any city, municipality, or
province unless the local government concerned shall have adopted
adequate land use and control measures with effective enforcement
provisions which the Director finds are consistent with the
comprehensive criteria for land management and use under this Act.

(b) Notwithstanding any other provision of law, the adequate land
use and control measures required to be adopted pursuant to subsection
(a) may provide, at the discretion of the local government, for the repair
and restoration to pre-damaged conditions of an agricultural structure
that -

(1) Is a repetitive loss structure; or

(2) Has incurred flood-related damage to the extent that the cost of

restoring the structure to its pre-damaged condition would equal

or exceed fifty percent (50%) of the market value of the structure
before the damage occurred.

(c) The Director shall provide technical assistance and counseling,
upon request of the owner of the structure, regarding wet flood-proofing
and other flood damage reduction measures for agricultural structures.
The Director shall not be required to make flood damage reduction
measures for agricultural structures. The Director shall not be required
to make flood insurance coverage available for such an agricultural
structures. The Director shall not be required to make flood insurance
coverage available for such an agricultural structure unless the structure
is wet flood-proofed through permanent or contingent measures applied
to the structure of its contents that prevent or provide resistance to
damage from flooding by allowing food waters to pass through the

structure, as determined by the Director.

Section 19. Properties in Violation of Law. - No flood
insurance coverage shall be provided under this Act for any property
which the Director finds has been declared by a duly constituted zoning
authority of the local government, or other authorized government
agency, to be in violation of laws, regulations, or ordinances which are
intended to discourage or otherwise restrict land development or

occupancy in flood-prone areas.


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Section 20. Industry Flood Insurance Pool. - (a) The Director
is authorized to encourage and otherwise assist any insurance
companies and other insurers which meet the requirements under
subsection (b) of this section to form, associate, or otherwise join
together in a flood insurance pool —

(1) In order to provide the flood insurance coverage authorized

under this Act; and

(2) For the purpose of assuming, on such terms and conditions as

may be agreed upon, such financial responsibility as will

enable such companies and other insurers participating in
such pool including, but not limited to, minimum requirements
for capital or surplus or assets.

(b) In order to promote the effective administration of the flood
insurance program under this Act, and to assure that the objectives of
this Act are furthered, the Director is authorized to prescribe
appropriate requirements for insurance companies and other insurers
participating in such pool including, but not limited to, minimum
requirements for capital or surplus or assets.

(c) The Director is authorized to enter into such agreements with
the pool formed or otherwise created under this Act as he or she deems
necessary to carry out the purposes of this Act.

(d) Such agreements shall specify -

(1) the terms and conditions under which risk capital will be
available for the adjustment and payment of claims;

(2) the terms and conditions under which the pool, and the
companies and other insurers participating therein, shall participate in
premiums received and profits or losses or sustained; and

(3) the terms and conditions under which operating costs
may be paid.

In addition, such agreements shall contain such provisions as the
Director finds necessary to assure that-

(1) no insurance company or other insurer which meets the
requirements prescribed under regulations by the Director, and which
has indicated an intention to participate in the flood insurance program

on a risk-sharing basis, will be excluded from participating in the pool;


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(2) the insurance companies and other insurers participating
in the pool will take whatever action may be necessary to provide
continuity of flood insurance coverage by the pool; and

(3) any insurance companies and other insurers, insurance
agents and brokers, and insurance adjustment organization will be
permitted to cooperate with the pool as fiscal agents or otherwise, on
other than a risk-sharing basis, to the maximum extent practicable.

Section 21. Adjustment and Payment of Claims. - The
insurance companies and other insurer which form, associate, or
otherwise join together in the pool under this party may adjust and pay
all claims for proved and approved losses covered by flood insurance in
accordance with the provisions of this Act and, upon the disallowance by
any such company or other insurer of any such claim, or upon the
refusal of the claimant to accept the amount allowed upon any such
claim, the claimant, within one (1) year after the date of receipt by
registered mail of notice of disallowance or partial disallowance of the
claim, may institute an action on such claim against such company or
other insurer in the Regional Trial Court which has jurisdiction over the
insured property or the major part thereof shall have been situated, and
original exclusive jurisdiction is hereby conferred upon such court to
hear and determine such action without regard to the amount in

controversy.

Section 22. Records and Audits. - (a) The flood insurance pool
formed or otherwise created under this Act, and any insurance company
or other private organization executing any contract, agreement, or other
appropriate arrangement with the Director under this Act, shall keep
such records as the Director shall prescribe, including records which
fully disclose the total costs of the program undertaken or the services
being rendered, and such other records as will facilitate an effective
audit.

(b) The Director and the Commission on Audit shall have access
for the purpose of audit and examination to any books, documents,
papers, and records of the pool and any such insurance company or
other private organization that are pertinent to the costs of the program

undertaken or the services being rendered.


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Section 23. Identification of Flood-Prone Areas. - (a) The
Director is authorized to consult with, receive information from, and
enter into any agreements or other arrangements with other departments
and agencies of the government, nongovernment organizations,
international organizations, and international state agencies, in order
that the Director may -

(1) Identify and publish information with respect to all flood plain
areas, including coastal areas located in the Philippines,
which has special flood hazards, within five (5) years from the
effectivity of this Act, and

(2) 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 of these
areas.

(b) The Director is directed to accelerate the identification of risk

zones within flood-prone and mudslide-prone areas, in order to

make known the degree of hazard within each such zone at the
earliest possible date. To accomplish this objective, the Director is
authorized, to make grants, provide technical assistance, and enter
into contracts, cooperative agreements, or other transactions, on
such terms as he may deem appropriate, or consent to
modifications thereof, and to make advance or progress payments
in connection therewith.

(c) The Secretary of National Defense, the Secretary of the

Interior, the Secretary of Agriculture, the Secretary of

Environment, the Secretary of Science and Technology, and the

heads of all other government agencies engaged in the

identification or delineation of flood-risk zones, in consultation
with the Director, give the highest practicable priority in the
allocation of available manpower and other available resources to
the identification and mapping of flood hazard areas and flood-risk
zones, in order to assist the Director to meet the deadline
established by this section.

(d) The Director shall, not later than three (3) years from the
effectivity of this Act, submit to the Congress a plan for bringing all


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communities containing flood-risk zones into full program status
not later than five (5) years from the submission of such plan.

(e) Once during each five (5) year period, the Director shall
assess the need to revise and update all floodplain areas and flood
risk zones identified, delineated, or established under this section,

based on an analysis of all natural hazards affecting flood risks.

Section 24. Criteria for Land Management and Use. - (a)
The Director is authorized to carry out studies and investigations,
utilizing to the maximum extent practicable the existing facilities
and services of other government departments or agencies, local
governmental agencies, and any other organizations, with respect
to the adequacy of local government measures in flood-prone areas
as to land management and use, flood control, flood zoning, and
flood damage prevention, and may enter into any contracts,
agreements, or other appropriate arrangements to carry our such
authority.

(b) Such studies and investigations shall include, but not
limited to, laws, regulations, or ordinances relating to
encroachments and obstructions on stream channels and
floodways, the orderly development and use of flood plains of rivers
or streams, floodway encroachment lines, and flood zoning,
building permits, and subdivision or other building restrictions.

(c) On the basis of such studies and investigations, and
such other information as he or she deems necessary, the Director
shall from time to time develop comprehensive criteria designed to
encourage, where necessary, the adoption of adequate national and
local government measures which, to the maximum extent feasible,
will-

(1) constrict the development of land which is exposed to
flood damage where appropriate;

(2) guide development of proposed construction away from
locations which are threatened by flood hazards;

(3) assist in reducing damage caused by flood; and

(4) otherwise improve the long range land management and
use of flood-prone areas, and the Director shall work closely with

and provide any necessary technical assistance to national and


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local governmental agencies, to encourage the application of such

criteria and the adoption and enforcement of such measures.

Section 25. Notice Requirements. - (a) The Bangko Sentral ng
Pilipinas (BSP) shall through regulation require lending institutions, as a
condition of making, increasing, extending, or renewing any loan secured
by improved real estate that the lending institution determines is located
or is to be located in an area that has been identified by the Director
under this Act as an area having special flood hazards, to notify the
purchaser or lessee of such special flood hazards, in writing, a
reasonable period in advance of the signing of the purchase agreement,
lease, or other documents involved in the transaction. The regulations
shall also require that the lending institution retain a record of the
notices by the purchaser or lessee.

(b) The written notification required under this section shall
include -

(1) a warning, in a form to be established by the Director, stating

that the building on the improved real estate securing the loan is

located, or is to be located in an area having special flood hazards;

(2) a description of the flood insurance purchase requirements

under this Act;

(3) a statement that flood insurance coverage may be purchased

under the national flood insurance program and is also available

from private insurers; and

(4) any other information that the Director considers necessary to

carry out the purposes of the national flood insurance program.

(c) The Director shall, not less than forty-five (45) days before the
expiration of any contract for flood insurance under this Act, issue notice
of such expiration by registered mail to the owner of the property covered

by the contract, and (if known to the Director) the owner of the loan.

Section 26. Mitigation Assistance. - (a) The Director shall carry
out a program to provide financial assistance to local government for
planning and carrying out activities designed to reduce the risk of flood
damage to structures covered under contracts for flood insurance under
this Act. Such financial assistance shall be made available to local

government units in the form of grants under this section for planning


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assistance and in the form of grants under this section for carrying out
mitigation activities.

(b) The Director may make grants under this subsection to local
government units to assist in developing mitigation plans under this
section. To be eligible to receive financial assistance under this section
for mitigation activities, a local government unit shall develop, and have
approved by the Director, a flood risk mitigation plan that describes the
mitigation activities to be carried out the with assistance provided that is
consistent with the criteria established by the Director pursuant to this
Act, and provides protection against flood losses to structures for which
contracts for flood insurance are available under this act. The mitigation
plan shall be consistent with a comprehensive strategy for mitigation
activities for the area affected by the mitigation plan, that has been
adopted by the local government unit following a public hearing.

(c) The Director shall notify a local government unit submitting a
mitigation plan of the approval or disapproval of the plan not later than
one hundred twenty (12) days after submission of the plan. If the
Director does not approve a mitigation plan submitted under this
subsection, the Director shall notify, in writing, the local government unit
submitting the plan of the reasons for such disapproval.

(d) The Director shall approve only mitigation plans that specific

mitigation activities that the Director determined are technically feasible
and cost-effective and only such plans that propose activities that are
cost-beneficial.

(ce) The Director shall determine whether mitigation activities
described in a mitigation plan submitted pursuant to this section comply
with the requirements under subsection (d). Such activities may include

(1) demolition or relocation of any structure located on land that is
along the shore of a lake or other body of water and is certified by an
appropriate local government land use authority to be subject to
imminent collapse or subsidence as a result of erosion flooding;

(2) elevation, relocation, demolition, or floodproofing of structures
(including public structures) located in areas having special flood
hazards or other areas of flood risk;

(3) acquisition by local governments of properties located in areas
having special flood hazards or other areas or other areas of flood risk


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and properties substantially damaged by flood, for public use, as the
Director determines is consistent with sound land management and use
in such area;

(4) minor physical mitigation efforts that do not duplicate the flood
prevention activities of such other government agencies and that lessen
the frequency or severity of flooding and decrease predicted flood
damages, which shall not include major flood control projects such as
dikes, levees, seawalls, groins, and jetties unless the Director specifically
determines in approving a mitigation plan that such activities are the
most cost-effective mitigation activities;

(5) beach nourishment activities;

(6) the provision of technical assistance by the local governments

to communities and individuals to conduct eligible mitigation activities;

(7) other activities that the Director considers appropriate and
specifies in regulation; and

(8) other mitigation activities not described in subparagraphs (1)
through (6) or the regulations issued under subparagraph (7), that are
described in the mitigation plan of the local government unit.

Section 27. Rules and Regulations. Within ninety (90) days
from effectivity of this Act, the Director, in consultation with the
Secretary of Finance and the Insurance Commissioner, shall promulgate
the necessary rules and regulations to carry out the objectives of this
Act.

Section 28. Authorization of Appropriations. - To carry out
the provisions of this Act, there are authorized to be appropriated such
sums as may be necessary for each fiscal year.

The National Flood Insurance Program must be established within
one (1) year from the date of the effectivity of this Act.

Section 29, Reportorial requirement - Within two (2) years after
the establishment of the National Flood Insurance Program, the Director
shall submit a report to Congress on the costs and means to implement
the Provisions of this Act. Thereafter, the Director shall submit an

annual report to Congress.


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Section 30. Separability Clause. - If any provisions or part
hereof is held invalid or unconstitutional, the remainder of the law or
provision not otherwise affected shall remain valid and subsisting.

Section 31. Repealing Clause. - Any law, presidential decree or
issuance, executive order, letter of instruction, administrative order, rule
or regulation contrary to or inconsistent with the provisions of this Act is
hereby repealed, modified, or amended accordingly.

Section 32. Effectivity Clause. - This Act shall take effect
fifteen (15) days after its publication in at least two (2) newspapers of

general circulation.

Approved,