* Senate likely to give bill final approval
* Backers include bankers and builders
WASHINGTON, March 4 (Reuters) - The U.S. House of Representatives, in a rare act of bipartisanship, overwhelmingly passed a bill on Tuesday to protect millions of American homeowners and businesses from dramatic increases in their flood insurance premiums.
On a vote of 306-91, the Republican-led House sent the measure - the Homeowners Flood Insurance Affordability Act of 2014 - to the Democratic-led Senate for likely final approval.
With homeowners and businesses facing premiums hikes of up to 10-fold or more as result of a 2-year-old law, the bill would limit annual increases of any individual policy under the National Flood Insurance Program to no more than 18 percent.
The legislation 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 total coverage amount.
The 18 percent cap and "affordability target" were among the changes Democrats and Republicans agreed to in revamping the bill, initially approved by the Senate earlier this year.
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.
The law was passed to address a $24 billion deficit in the NFIP, which serves about 5 million people and 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 more than 10 times, 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 find a solution.
The Senate bill would have delayed any rate hikes for four years while FEMA seeks changes. The House version would not delay the hikes, but limit them.
Backers of the bill include realtors, banks and homebuilders. A number of conservative groups oppose it, largely because of the continuation of subsidized insurance rates.
The nonpartisan Congressional Budget Office said the House-passed bill would have zero impact on the financial standing of the NFIP over the next decade.
The CBO said the bill would pay for itself with 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 Peter Cooney)