The hurricane season has been much quieter than anticipated, and it's a lucky turn of events for a number of reasons. First and foremost, of course, Florida and other Atlantic and Gulf Coast states have avoided the property damage and fatalities the come with a major storm.
Second, the Federal Emergency Management Agency may be open for business, but it is open with a reduced workforce. FEMA called some workers back last week when Tropical Storm Karen was headed for the Gulf Coast. Disaster relief may not suffer, though agencies that support FEMA may not be able to call workers back.
Government sources said the agency would continue to operate the National Flood Insurance Program, too. We wonder if operators are standing by to take homeowners' calls about their recalculated flood insurance premiums. Property insurance companies cannot be taking all the heat.
Many of the complaints about the precipitous increase in rates concern the overall effect on the housing market. The market has been improving, but the redrawn flood maps and much higher "actuarially sound" rates could catch both existing and prospective homeowners by surprise.
If homebuyers were not expecting to pay for flood insurance, much less expecting to pay the higher rates, they may walk away from the deal. Or, homebuyers may opt out of flood insurance because they cannot afford it, not realizing that their mortgage lender will purchase the insurance for them -- and, as we have discussed in many posts, force-placed insurance is seldom the least expensive option.
Florida has been an enthusiastic participant in NFIP for decades, Gov. Rick Scott says in his letter to Florida's U.S. senators. We have paid more than $16 billion in premiums but collected less than one-quarter of that in benefits. And, the state has learned how to prepare for storms, instituting better building codes and flood mitigation measures. The state, Scott concludes, does not deserve such a steep increase in rates; if anything, the state deserves a break for its risk management efforts.
It is impossible to guess if Congress will return to NFIP before the budget dispute and debt ceiling battle are over. We will certainly keep an eye out for developments.
Source: Property Casualty 360, "One Wet Mess: Lawmakers, FEMA Howl Over Impending Flood Rate Hikes," Arthur D. Postal, Sep. 19, 2013