What This Bill Does
This bill requires that flood insurance premium rates include replacement cost value, which means calculating premiums based on what it would actually cost to rebuild a damaged property. The Federal Emergency Management Agency must first study how to include replacement cost value in flood insurance pricing, then implement this change gradually across the country over time.
Who It Affects
Property owners who buy flood insurance through the National Flood Insurance Program
The Federal Emergency Management Agency
Congress committees on Financial Services and Banking, Housing, and Urban Affairs
Key Provisions
The Federal Emergency Management Agency must conduct a study to evaluate how insurance companies use replacement cost value in setting rates and recommend ways to include this method in flood insurance pricing (Sec. 1(a)(1))
The agency must submit a report within 12 months containing study results, analysis of potential impacts on the flood insurance program, and explanations of any recommendations that are delayed or rejected (Sec. 1(a)(2))
Flood insurance premium rates must incorporate replacement cost value starting 12 months after this law passes (Sec. 1(b)(1) and (b)(2))
The new replacement cost value requirement will be phased in gradually across different geographic regions over three years, then apply to all flood insurance policies nationwide (Sec. 1(b)(4))
What Changes
Federal flood insurance premium rates will be calculated using replacement cost value instead of current methods. This change takes effect 12 months after the law passes and rolls out regionally over a three-year period before applying everywhere.
Important Definitions
Replacement cost value: The estimated cost to completely rebuild a damaged property
Effective Date
12 months after the date this bill becomes law
I
118TH CONGRESS
1ST SESSION H. R. 1309
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.
IN THE HOUSE OF REPRESENTATIVES
MARCH 1, 2023
Mr. LUETKEMEYER introduced the following bill; which was referred to the
Committee on Financial Services
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 pur-
poses.
Be it enacted by the Senate and House of Representa-
1
tives of the United States of America in Congress assembled,
2
SECTION 1. USE OF REPLACEMENT COST IN DETERMINING
3
PREMIUM RATES.
4
(a) STUDY OF RISK RATING REDESIGN FLOOD IN-
5
SURANCE PREMIUM RATING OPTIONS.—
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•HR 1309 IH
(1) STUDY.—The Administrator of the Federal
1
Emergency Management Agency shall conduct a
2
study to—
3
(A) evaluate insurance industry best prac-
4
tices for risk rating and classification, including
5
practices related to replacement cost value in
6
premium rate estimations;
7
(B) assess options, methods, and strategies
8
for including replacement cost value in the Ad-
9
ministrator’s
estimates
under
section
10
1307(a)(1) of the National Flood Insurance Act
11
of 1968 (42 U.S.C. 4014(a)(1));
12
(C) provide recommendations for including
13
replacement cost value in the estimate of the
14
risk premium rates for flood insurance under
15
such section 1307(a)(1);
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(D) identify an appropriate methodology to
17
incorporate replacement cost value into the Ad-
18
ministrator’s estimates under such section
19
1307(a)(1); and
20
(E) develop a feasible implementation plan
21
and projected timeline for including replace-
22
ment cost value in the estimates of risk pre-
23
mium rates for flood insurance made available
24
under the National Flood Insurance Program.
25
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•HR 1309 IH
(2) REPORT.—
1
(A) REQUIREMENT.—Not later than the
2
expiration of the 12-month period beginning on
3
the date of the enactment of this Act, the Ad-
4
ministrator shall submit to the Committee on
5
Financial Services of the House of Representa-
6
tives and the Committee on Banking, Housing,
7
and Urban Affairs of the Senate a report that
8
contains the results and conclusions of the
9
study required under paragraph (1).
10
(B) CONTENTS.—The report submitted
11
under subparagraph (A) shall include—
12
(i) an analysis of the recommenda-
13
tions resulting from the study under para-
14
graph (1) and any potential impacts on the
15
National Flood Insurance Program, includ-
16
ing cost considerations;
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(ii) a description of any actions taken
18
by the Administrator to implement the
19
study recommendations; and
20
(iii) a description of any study rec-
21
ommendations that have been deferred or
22
not acted upon, together with a statement
23
explaining the reasons for such deferral or
24
inaction.
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•HR 1309 IH
(b) USE OF REPLACEMENT COST VALUE IN PRE-
1
MIUM RATES; IMPLEMENTATION.—
2
(1) ESTIMATED RATES.—Paragraph (1) of sec-
3
tion 1307(a) of the National Flood Insurance Act of
4
1968 (42 U.S.C. 4014(a)(1)) is amended, in the
5
matter preceding subparagraph (A), by inserting
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after ‘‘flood insurance’’ the following: ‘‘, which shall
7
incorporate replacement cost value, and’’.
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(2) CHARGEABLE
RATES.—Subsection (b) of
9
section 1308 of the National Flood Insurance Act of
10
1968 (42 U.S.C. 4015(b)) is amended, in the matter
11
preceding paragraph (1), by inserting after ‘‘Such
12
rates’’ the following: ‘‘shall incorporate replacement
13
cost value and’’.
14
(3) EFFECTIVE DATE.—The amendments under
15
paragraphs (1) and (2) of this subsection shall be
16
made upon the expiration of the 12-month period
17
beginning on the date of the enactment of this Act.
18
(4) APPLICABILITY
AND
PHASE-IN.—The Ad-
19
ministrator of the Federal Emergency Management
20
Agency shall apply the amendments under para-
21
graphs (1) and (2) to flood insurance coverage made
22
available under the National Flood Insurance Act of
23
1968 for properties located in various geographic re-
24
gions in the United States such that—
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•HR 1309 IH
(A) over the three-year period beginning
1
upon the expiration of the period referred to in
2
paragraph (3) of this subsection, the require-
3
ment under such amendments shall be gradu-
4
ally phased in geographically throughout the
5
United States as sufficient information for such
6
implementation becomes available; and
7
(B) after the expiration of such period re-
8
ferred to in subparagraph (A), such amend-
9
ments shall apply to all flood insurance cov-
10
erage made available under the National Flood
11
Insurance Act of 1968.
12
Æ
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