Flood insurance rates at high tide
WEST OCEAN CITY—Federal lawmakers are trying to scale back the unintended impact of previous legislation that could cause flood insurance premium rates skyrocketing for some local homeowners with subsidized policies, meanwhile one subset of policyholders will be allowed to keep their subsidized plans thanks to an omnibus spending bill that was recently signed into law.
Ralph Giove in West Ocean City said during a Jan. 30 interview, his annual flood insurance premiums were on average $280 to $300 annually from 1978 to 2012. But when he received a bill in 2013 for $1,100 he called officials at the Federal Emergency Management Agency to find out why. He said he was told there was no elevation certificate on file and that getting one might result in lower premium rates.
However, according to Giove, after spending $400 to get an elevation certificate, he then received a bill for an additional $600 rate adjustment from FEMA, because his home was not elevated high enough to meet the mandated height requirements. The premium he received this year, Giove said, was $2,200.
Part of what Giove perceived as an insurance premium rate increase was likely the removal of a subsidy that had kept his flood insurance premium rates low for a number of years with the enactment of the Biggert-Waters Flood Insurance Reform Act of 2012. It could also be part of a re-designation as FEMA updates it flood insurance rate maps or other factors specific to his individual property.
In a recent letter to constituents, Rep. Andy Harris (R) explained “the federal government had provided subsidized insurance for properties built before flood insurance rate maps were established since 1968, when the program began and that more than 1.1 million policies (21 percent) were subsidized in 2012.” But, he said, “That number dropped to about 715,000 after Biggert-Waters was implemented, with the largest number of remaining policies in Florida, Louisiana, California, New Jersey, Texas and New York, in that order,” he said.
According to Harris, the Biggert-Waters Act required FEMA to phase out various subsidies and discounts to reduce the federal flood insurance program’s debts, prevent the bankruptcy of the program, and improve its sustainability into the future. The program “already has a debt of $24 billion as of May 2013, according to a Government Accountability Office report, after big payouts from events such as Superstorm Sandy and Hurricane Katrina,” Harris said, and if its resources are depleted, it could threaten future payouts to homeowners for storm damage.
David Bollinger, mitigation outreach coordinator for FEMA’s Region III, Biggert Waters, directed FEMA to phase its subsidized policies to full risk rate policies over a five-year period with 20 percent annual rate increases, which began in October, 2013 for certain policies. However, after hearing from angry and concerned homeowners, lawmakers quickly backtracked to proposals to tamp down the immediate effects of the new law.
Tucked into the Consolidated Appropriations Act, 2014 that President Barack Obama signed into law on Jan. 17 (Pub. L. No: 113-76) was a provision that blocked the funding needed to remove the grandfathered subsidies for flood insurance premiums for homes that had been redesignated from low to high risk. The removal of the subsidy was scheduled to take affect later this October. As a result of the enacted provision the subsidy will remain in place until FEMA officials complete an affordability study, which he said is expected to be done by the end of the fiscal year.
New, unsubsidized rates for secondary homes, businesses and homes that have repeatedly been damaged by prior flood events were not impacted by the relief provision in the budget bill, according to FEMA spokesman Peter Herrick.
The proposal to delay upcoming changes to the National Flood Insurance Program’s (NFIP) flood insurance rate maps was introduced on Jan. 14 by New Jersey Sen. Robert Menendez (D) and Georgia Sen. Johnny Isakson (R). In a statement after the vote, Menendez said the delay of the implementation of flood insurance rate increases “protects NFIP policyholders who have no annual cap on their rate increases and have seen their property values plummet as a direct result of Biggert-Waters.” He added, “This includes all homes and businesses that were built to code and later remapped into a higher risk area and all properties that were built before flood maps were released which could see their rates skyrocket overnight when they try to sell their property.
Harris said in a Jan. 30 e-mail he would support the House companion bill, Homeowner Flood Insurance Affordability Act of 2013 (H.R. 3370), which would further delay some scheduled increases in flood insurance premiums under the National Flood Insurance Program.