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Creates a new “erosion coverage” rule allowing the NFIP Administrator to pay for the proper demolition or relocation of insured shoreline structures that are condemned or are imminently threatened by collapse or subsidence. The provision defines how structure value is determined, establishes limits on payments and eligibility, and directs the Administrator to issue implementing regulations to carry out the rule. This changes how the National Flood Insurance Program responds to shoreline structures at immediate risk of failure by adding a specific payment authority for demolition or relocation, and it requires administrative rules to define procedures, valuation, and eligibility.
Adds a new subsection (e) titled "Erosion coverage" to Section 1306 of the National Flood Insurance Act of 1968, creating rules for flood insurance payments related to structures on land threatened by imminent collapse or subsidence due to shoreline erosion.
If a covered structure is condemned or deemed unsafe for habitation by a State or local authority because of imminent collapse or subsidence (including being partially or wholly over water, a shoreline bluff or escarpment, or below Mean Higher High Water), the Administrator shall, following a final determination that the claim complies with regulations, pay amounts under the flood insurance contract for proper demolition or relocation.
Demolition payments: After final determination, the Administrator shall pay 40 percent of the value of the structure; if the owner properly demolishes the structure (including any septic containment system) within 6 months of that payment and before collapse, the Administrator will pay the remaining 60 percent of the value or the actual cost of demolition, whichever is less.
Relocation payments: If the owner chooses relocation (including removal of any septic containment system), following final determination and prior to collapse the Administrator may pay up to 40 percent of the value of the structure, but total payment under this provision may not exceed the actual cost of relocation.
If a structure subject to a final determination collapses or subsides, or six or more months elapse before the owner demolishes or relocates the structure, and the Administrator determines the owner failed to take reasonable and prudent action to demolish or relocate it, the Administrator shall not pay more than the 40 percent amount described in paragraph (1)(A)(i).
Primary effects:
Property owners of shoreline structures that carry NFIP coverage: These owners stand to receive federal payments to cover the cost of proper demolition or relocation when their insured structure has been condemned or is in imminent danger of collapse or subsidence. That can lower out‑of‑pocket costs and remove an immediate safety hazard.
Coastal and shoreline communities: The authority could speed hazard mitigation by removing dangerous structures, reduce public safety risks, and limit local emergency responses related to collapsing buildings. It could also change how local planning or permitting deals with deteriorating shoreline buildings.
National Flood Insurance Program (NFIP) administration: The NFIP (FEMA/Administrator) must draft and adopt implementing regulations, create valuation and payment procedures, and manage the additional claim/assistance type. That will require administrative work and may increase program expenditures depending on uptake.
Federal fiscal exposure and insurance pool: The change expands the types of payments the NFIP can make, which could raise program costs and influence actuarial assessments or future premiums if claims are frequent or large. The section itself does not appropriate funds, so actual fiscal effects depend on program budgeting and claim volume.
Insurance policyholders and coastal development incentives: By providing demolition/relocation payments, the change may lower the short-term financial burden for at-risk owners, but it could also create moral‑hazard or development-incentive questions for coastal properties if not paired with clear eligibility limits and risk-based pricing.
Potential issues and uncertainties:
Expand sections to see detailed analysis
Referred to the House Committee on Financial Services.
Introduced May 1, 2025 by Gregory Francis Murphy · Last progress May 1, 2025
Referred to the House Committee on Financial Services.
Introduced in House