Bill delaying higher flood insurance rates could become law by year’s end

Published on: November 14, 2013

Congresswoman Kathy Castor is co-sponsoring a bill to delay huge rate hikes to flood insurance. Mitch Traphagen File Photo

Congresswoman Kathy Castor is co-sponsoring a bill to delay huge rate hikes to flood insurance. Mitch Traphagen File Photo


Legislation that sent flood insurance premiums skyrocketing for some waterfront homes and is chilling part of the local real estate market will be reformed by the end of the year, an author of the law said Nov. 9.

Homeowners and Realtors have been calling for relief from the stiff rate increases, organizing rallies across the nation, including last month in Tampa Bay, to protest rates that have increased by 600 percent in some cases.

The rate hikes went into effect Oct. 1 for anyone seeking a new policy.

Amy Soto, a Riverview Realtor who has been buying and selling homes in South County for 13 years, said the rate hike is hurting the local real estate market.

“Just the threat of flood insurance rates going up will keep potential buyers from buying. It’s going to be a much harder sell for some people and it will limit the buyer pool.”

In the wake of the uproar, Congresswoman Maxine Waters, a co-author of the law that led to the rate hikes, now says the law will be changed.

“Over the past several months, I have felt the harm and heartache that many Americans have already experienced as a result of changes to the National Flood Insurance Program. From the start, I have made clear that I would lead the effort to fix the unintended consequences of the Biggert-Waters Flood Insurance Reform Act,” said Waters in a statement released by her office announcing the deal.

Local Congresswoman Kathy Castor is co-sponsoring the bill.

“This bipartisan breakthrough will benefit thousands of families and businesses in Florida and other states, and will responsibly analyze flood insurance reform in a measured, reasonable way that focuses on stability for homeowners,” Castor said. “I am pressing to have Congress act quickly to pass this bipartisan legislation that provides relief for my neighbors, some of whom saw their rates skyrocket overnight.”

Waters’ new plan delays potential rate increases up to four years.

The California Democrat, who is leading a bipartisan group of 50 House members and 15 senators who filed the Homeowner Flood Insurance Affordability Act last month, hopes the bill will become law by the end of the year.

The Biggert-Waters Flood Insurance Reform Act of 2012 was intended to dig the National Flood Insurance Program (NFIP) out of a financial black hole. The federal program that insures many waterfront properties across the U.S. is currently $24 billion in the red, the result of claims made after superstorms like Hurricane Katrina.

The NFIP was created by Congress in 1968 because flood insurance was virtually unavailable from the private insurance markets following frequent widespread flooding along the Mississippi River in the early 1960s. Private insurance companies are still wary about writing policies in flood-prone communities, leaving the federal government as the insurance of choice in many waterfront communities.

Of the NFIP’s 5.6 million policyholders, 1.1 million are subsidized, according to the Federal Emergency Management Agency (FEMA). Florida is the program’s largest customer with 2 million policies.

The 2012 law called on FEMA and other agencies to make a number of changes to the way NFIP is run, including raising rates to reflect true flood risk. The changes will mean premium rate increases for most NFIP policyholders over time.

“Realtors understand the need for solvency in the federal flood program. However, the law contains severe unintended consequences that are harmful to Floridians as well as other states,” said Florida Realtors President Dean Asher.

“We believe the reforms will have a detrimental impact on the entire economy of Florida, including existing homeowners and those who want to buy Florida properties,” said Asher after a meeting with Gov. Rick Scott last week on the issue.

Congress has apparently been listening to Asher and others. Specifically, the legislation will:

• Impose a delay likely to total four years for the most vulnerable properties, by delaying implementation of rate increases until two years after FEMA completes an affordability study, which was mandated in Biggert-Waters but not undertaken. FEMA has estimated it will take two years to complete the affordability study. It would then take up to an additional two years for FEMA to submit an affordability framework to Congress and for Congress to review the framework. This means rate increases would be delayed for four years in total.

• Allow FEMA to utilize National Flood Insurance Funds to reimburse policyholders who successfully appeal a map determination.

• Eliminate the 50 percent cap on state and local contributions to levee construction and reconstruction.

• Require FEMA to certify that the agency has fully adopted a modernized risk-based approach to analyzing flood risk.
The bipartisan deal came after several weeks of negotiations with Democrats and Republicans in the House and Senate.

Other state representatives backing the bill are Connie Brown (D-Jacksonville), Lois Frankel (D-Boca Raton), Frederica Wikson (D-Miami) and Patrick Murphy (D-West Palm Beach). Senator Bill Nelson has also backed the new bill.