In a rare bipartisan move, the Biggert-Waters Flood Insurance Reform Act was passed in 2012, hailed as necessary to save the National Flood Insurance Program (NFIP).
The bill was an attempt to make flood insurance premiums reflect the true risk of living in a flood zone and to end government subsidizing of rates that were often too low. It was also seen as a way to equalize coverage, since the low rates were thought to unfairly benefit high-net-worth owners and builders of luxury coastal homes rather than people who could lose everything in a flood.
But when the bill took effect in 2013, flood insurance rates skyrocketed, and many owners suddenly found their homes on newly redrawn flood zone maps.
Homeowners and business owners cried foul. Local officials worried that massive rate hikes would turn popular seaside communities into ghost towns, driving property values down and forcing people to abandon homes and businesses they could no longer afford to insure but were unable to sell.
That scenario wasn’t all that far-fetched; many homeowners in formerly subsidized areas found themselves unable to pay the new rates and equally unable to sell their homes. Although some have been able to pay off their mortgages to avoid the requirement for flood insurance, doing without coverage in a hurricane-prone area is a huge risk.
As a result, a bill was drafted to postpone implementation and continue the subsidies that had put the NFIP so deeply in the red. In late January, the Senate passed a bill with bipartisan support to stall those hefty increases. In early March, a compromise bill passed by the House was sent back to the Senate, where it was approved on March 13 and sent to the White House for signature.
[Editor's Note: The bill was signed into law by President Obama on March 21.]
The Grimm-Waters Act, also known as the Homeowner Flood Insurance Affordability Act, rolls back a number of provisions of the Biggert-Waters Act. Annual rate increases have been limited to 15% for a class of properties, and 18% on individual properties. Homeowners who were paying subsidized low flood insurance rates have been grandfathered in; the bill also allows homeowners who paid those low rates to pass along their flood insurance rates to home buyers.