Pennsylvania Strengthens Flood Risk Disclosure Law for Real Estate Transactions

Pennsylvania Governor Josh Shapiro has signed a new law that strengthens flood risk disclosure requirements in real estate transactions, a move to arm prospective homebuyers with critical insights on flooding risks and related insurance costs.

The legislation, known as House Bill 1704, will take effect in July 2028. It compels sellers to disclose any history of flood damage to the property, whether the property is located in a FEMA-designated flood zone, and if the property has previously been subject to flood insurance requirements. These disclosures also include any government aid received due to flood damage and details of any flood insurance claims filed. Such measures aim to close existing gaps in flood risk awareness, given that standard homeowners insurance policies typically exclude flood-related losses.

Enhanced Flood Risk Awareness

This bill is a direct response to findings from Pennsylvania’s 2024 Flood Insurance Premium Assistance Task Force. Spearheaded by Representative Perry Warren, the task force report underscored significant needs in affordability, risk mitigation, and consumer education. It advocated for stronger flood risk disclosures at the point of sale, as well as improved access to insurance and incentives to boost flood insurance policy uptake.

Current figures reveal that only about 1% of Pennsylvania households hold flood insurance. By implementing these new disclosure requirements, lawmakers hope to elevate consumer awareness and encourage higher participation in flood insurance programs.

Insurance Industry Implications

The Pennsylvania Insurance Department (PID) plays a pivotal role by offering resources on flood zones and insurance options. Insurance Commissioner Michael Humphreys has reiterated the importance of public awareness that extends beyond high-risk zones. Accordingly, the PID has updated its resources, providing tools and information to help consumers better assess individual flood risks.

• Mandatory seller disclosure of past flood damages and insurance claims.
• Identification of FEMA flood zones during property transactions.
• New education standards for insurance agents regarding flood insurance.
• Expanded resources on state websites for flood risk mitigation.

Professional Training Enrichment

To further empower the industry, House Bill 1704 mandates updated educational standards for insurance professionals. Agents and brokers handling property and casualty insurance must now dedicate at least two hours of their 24-hour continuing education requirement specifically to flood insurance. This requirement is intended to enhance competency and service quality among agents, ensuring they are equipped to navigate the nuances of flood insurance discussions with clients.

Pennsylvania's initiative is not just about meeting disclosure standards; it represents a holistic approach to evolving the landscape of flood insurance education and accessibility. By embedding these adjustments into legislative practice, the state seeks to establish a more informed consumer base and a more robust insurance market. As the enactment date approaches, industry professionals must prepare to adjust their practices and policies, aligning with the new regulations to better serve their clientele and contribute to a more resilient housing market.