It has been one year since Superstorm Sandy wreaked havoc in the Northeast and many homeowners along coastal areas in the U.S. are now facing substantial increases in their flood insurance premiums.
Lawmakers sought to reform the National Flood Insurance Program in 2012, by passing the Biggert-Waters Flood Insurance Reform Act. The new law was put into place to help the federal government reduce the $24 billion deficit from previous storms such as Katrina.
“The National Flood Insurance Program was designed to protect homes and businesses from flood damage, but as a result of this new law, coastal area property owners are facing steep insurance rate increases,” said Ellsworth Buck, Vice President of GreatFlorida Insurance, one of the largest independent insurance agency groups in Florida.
On October 1, subsidies expired and many Florida homeowners began to see rate hikes in their flood insurance premiums. The Biggert-Waters Act raises rates for owners of older properties in flood zones that were built before flood maps went into effect and have been subsidized with lower rates.
Most homeowner subsides are being gradually phased out with annual rate increases near 20 percent. In some cases such as the sale of a property, or a lapse in policy, the subsidy is eliminated with renewals this month. Some homeowners have seen their annual flood insurance premiums go from hundreds to more than $14,000.
Forbes Magazine reported the bill’s co-sponsor, Maxine Waters (D-Calif.) as saying, “When I agreed to co-author this legislation, our goal was to create a bi-partisan solution to repair our National Flood Insurance Program.”
“The current rate hikes could make it unaffordable for coastal area homeowners to remain in their homes and shatter Florida’s real estate market, said Buck.
The sweeping changes have attorney general’s from several states coming together to fight the rising costs of insuring flood zone properties.
Governor Rick Scott has come out in support of a Mississippi lawsuit that challenges the overhaul of the National Flood Insurance Program. Florida accounts for 40 percent of all flood policies in the country with Pinellas County having more subsidized policies than any other county in the U.S.
This week a group of lawmakers from the House and Senate are asking for a four year delay. The bill is known as the Homeowner Flood Insurance Affordability Act and has support from Senator Bill Nelson, (D-Fla).
The new bill would seek to delay rate hikes for four years and request a transfer of subsidies to new homebuyers. In addition they want the Federal Emergency Management Agency, (FEMA) to conduct an affordability study of imposing risk-based rates on homeowners and propose means to tackle affordability issues.
Homeowners with second homes or whose property has been repeatedly flooded would still have to pay the higher rates, which are scheduled to rise until their premiums reflect the true risk of flooding. Lawmakers from both parties have been demanding a delay in the Biggert-Waters reforms.