BRADENTON, Fla. Large federal flood insurance rate increases that phase in starting Oct. 1 threaten to derail the slowly improving economy in Southeastern Gulf coast states, regional officials said.
New flood zone maps, expanding boundaries inland, have also elevated concern about the impact of rising rates beyond the wealthy who can afford beachfront property and second homes, some have argued.
“In cases where new maps move a property into a flood zone, homeowners may find it impossible to sell their properties to a new owner who will be shocked with the massive premium increases required to secure a mortgage,” Florida Gov. Rick Scott wrote to Sen. Bill Nelson and Sen. Marco Rubio Sept. 17. “This unfair consequence could devastate parts of Florida’s real estate market, stymie Florida’s economic recovery, and diminish the state’s tax base.”
The increases, resulting from the Biggert-Waters Flood Insurance Reform Act in 2012 to eliminate subsidies in the deficit-ridden National Flood Insurance Program, will require multi-year rate hikes up to 25% until premiums reflect true risks, or actuarial rates.
Mississippi Insurance Commissioner Mike Chaney is considering a federal lawsuit in an attempt to block the rate increases, according to local media outlets.
Greater New Orleans Inc., a regional economic development organization leading a national coalition against the NFIP changes, said “incomplete and inaccurate maps, and questionable actuarial calculations will lead to premium increases of up to 3,000% and more for policyholders who have built to code and never flooded.”
The GNO says it supports a sound program but is critical of rate increases now because the Federal Emergency Management Agency has not completed an affordability study quantifying impacts on policyholders as required by the Biggert-Waters Act by April 2013. The group also contends that about 40% of federal-backed mortgages are not carrying required flood insurance, and that provision should be enforced.
FEMA Administrator Craig Fugate, whose agency oversees the NFIP, told the U.S. Senate Banking, Housing and Urban Affairs Committee Sept. 18 that it is up to Congress to delay implementing the rate increases.
In Florida, Scott said property owners have paid $16 billion to NFIP over the last 35 years “four times more than the amount received in claim reimbursement.”
The three states with the most policies in the NFIP are Florida with 2.06 million, Texas with 645,454, and Louisiana with 484,088 policies.