Any discussion of the National Flood Insurance Program rate hikes that went into effect on Oct. 1 has certainly been eclipsed by the news of the federal government shutdown. Homeowners along Florida's coast, though, may be tuning out news about the shutdown when they see their new flood insurance premiums.
The rates may be more actuarially sound, as mandated by the Biggert-Waters Act of 2012, but homeowners will be hard-pressed to see the wisdom of the program's financial stability when they see that the rates challenge their own financial security. At Congressional hearings last month, lawmakers told stories of constituents seeing rates increase as much as 3,000 percent.
Gov. Rick Scott summed up the state's objections to the new rates in a letter sent to Florida's U.S. senators, Marco Rubio and Bill Nelson, while the hearings were underway. The dramatic rate hikes will harm homeowners, the real estate market and, in the end, the economy, the governor said.
Up until now, the state's "glide path" has protected homeowners from hefty increases. The new bill, Scott explained, will remove the glide path and force homeowners to pay full-risk rates. By redrawing the flood maps at the same time as it was calculating the new rates, the Federal Emergency Management Agency has instituted a double whammy on some residents: For the first time ever they need flood insurance, and the rates are so high that they can barely afford them.
Scott also urged the Senate to consider the effect on new home purchases. We'll go into more detail and finish this up in our next post.
Source: Property Casualty 360, "One Wet Mess: Lawmakers, FEMA Howl Over Impending Flood Rate Hikes," Arthur D. Postal, Sep. 19, 2013