By Thomas Ferraro
WASHINGTON (Reuters) - A bipartisan bill to protect millions of Americans from potentially unaffordable increases in the cost of federal flood insurance won final U.S. congressional approval on Thursday.
On a vote of 72-22, the Democratic-led Senate sent the measure, earlier approved by the Republican-led House of Representatives, to President Barack Obama to sign into law.
With homeowners and businesses facing premium hikes of up to 10-fold or more, the measure would limit annual increases of any individual policy under the National Flood Insurance Program to no more than 18 percent.
The bill also instructs the Federal Emergency Management Agency to have "an affordability target" that would seek to limit the cost of a flood insurance policy to 1 percent of a home's or business's total coverage amount.
The legislation was drafted in response to the Biggert-Waters Flood Insurance Reform Act of 2012, which was designed to allow premiums to rise to reflect the true risk of living in high-flood areas.
That law was passed to address a $24 billion deficit in the NFIP. The federal flood insurance program serves about 5 million people and has had mounting losses, largely from Hurricane Katrina in New Orleans in 2005.
Shortly after enactment of the 2012 law, Superstorm Sandy hammered much of the U.S. Northeastern coast, generating another wave of insurance claims.
That law did not stipulate that rates would soar by 10 times or more, but that is what happened to the surprise of lawmakers and consternation of homeowners and small businesses.
Such rate hikes, they warned, could force many homeowners and businesses to sell their properties, which in turn could lower real estate values and damage the U.S. economy.
With so much at stake, normally warring Democrats and Republicans in Congress came together to craft a solution.
Backers of the bill include realtors, banks and homebuilders. A number of conservative groups opposed it, largely because of the continuation, although at a reduced level, of federally subsidized insurance rates.
The nonpartisan Congressional Budget Office said the new law would pay for itself with the help of annual assessments to NFIP's reserve fund - $25 a year for primary homeowners and $250 a year for businesses and vacation homeowners.
(Reporting By Thomas Ferraro; Editing by David Gregorio)