Bill Would Make Flood Insurance More Expensive on Vacation Homes.

WASHINGTON -- The House has passed a flood insurance reform bill by a 416-4 vote that phases out subsidized premiums on vacation/second homes and commercial properties - impacting an estimated 450,000 properties.

In phasing out the subsidies, the Federal Emergency Management Agency can increase premiums by 15% a year. However, FEMA can also increase overall premiums for actuarial reasons by another 15%. This means a vacation homeowner could get hit with a 30% increase.

"Premiums will increase, or may increase, up to a maximum of 30% per year," said Rep. Richard Baker, R-La., sponsor of the flood insurance reform bill (H.R. 4973.)

House Financial Services Committee chairman Michael Oxley, R-Ohio, said the bill is aimed at making the National Flood Insurance Program more actuarially sound by phasing out the subsidiaries enjoyed by owners of vacation and second homes. "If you can afford one of those homes, you can afford to pay the freight," Rep. Oxley said.

However, analysts at the Congressional Budget Office expect some property owners will drop or reduce their flood insurance coverage because of the higher premiums.

"As a result, the Congress might be under increased pressure to appropriate funds for disaster relief in the event of a major flood," CBO said.

During congressional debate, the House agreed that subsidized premiums on homes built before 1975 or before the first flood insurance rate maps (FIRM) were completed should not be passed on to new buyers.