BRADENTON, Fla. - Florida will join Mississippi in federal court to protest increases in national flood insurance premiums that both states fear will threaten their economies.
The Sunshine state will not attempt to join the suit as a defendant, but will file “friend of the court” brief.
The premium rate increases, which began taking effect Oct. 1, “could devastate Florida’s real estate market and homeowners,” Gov. Rick Scott said at a state Cabinet meeting last week.
Mississippi’s federal suit, which requests a stay to stop rate increases until certain studies are completed, will have its first hearing Oct. 28, court records show.
The issue has garnered widespread interest, and push back, from most coastal states.
Property owners in a flood zone are usually required to have flood insurance as a condition of their mortgages.
The National Flood Insurance Program, created by congress in 1968 because private insurers refused to offer the coverage, has 5.6 million policies nationwide.
Of those policies 1.12 million, or 20%, receive subsidized rates because they were in areas before the adoption of flood insurance rate maps. Their subsidized rates were grandfathered in.
Florida has more than two million flood policies. Some 13% or 268,500 are subsidized, according to a Florida Senate Banking and Insurance Committee presentation last week.
State insurance regulators told the panel they are attempting to quickly develop a program to attract private companies to underwrite flood insurance. It is not clear how that would work because private property insurance isn’t included in areas designated as flood zones.
Last year, to shore up a deficit in the flood program, Congress passed legislation requiring 25% rate increases annually for properties receiving subsidized rates, including secondary residences, businesses, and those that suffered from severe repetitive loss. Those rate increases will continue until the rates reflect true risk.
Primary residences will undergo the same rate hikes but only when homes are sold or the flood policy lapses.
Mississippi Insurance Commissioner Mike Chaney filed suit Sept. 26 to prevent what he called “draconian” rate increases.
At the time, Chaney said some consumers in his state would see rate increase of more than 3,000% because the Federal Emergency Management Agency has been changing base flood elevation maps, which are used to determine at-risk properties.
“Many of the new flood elevation maps are riddled with errors and consumers must pay for new elevation certificates to prove they are not in a flood zone,” Chaney said.
In support of his request for an injunction delaying rate increases, Chaney said FEMA failed to produce an “affordability” report that was also required of last year’s law to determine the impact of the new rates on property owners. That report was supposed to be completed before the rates went up.