Legislation Aimed at Expanding Private Flood Coverage in Florida
Around the State
Two Pinellas County lawmakers released a proposal Tuesday intended to make it easier for private insurers to offer flood coverage in Florida and to potentially make coverage more affordable for homeowners.
The measure (SB 542) by Sen. Jeff Brandes, R-St. Petersburg, is designed to increase competition by expanding the number of insurers offering flood insurance coverage in the Florida market.
The proposal comes as up to 13 percent of Florida's property owners now covered through the National Flood Insurance Program are in line for rate hikes of up to 25 percent a year. Some properties have been projected to face increases that reach 900 percent, and efforts to hold back the rising costs have floundered in Congress. The increases stem from a measure known as the 2012 Biggert-Waters Flood Insurance Reform Act.
“Floridians deserve an alternative to the drastic rate increases of Biggert-Waters," Brandes said in a prepared statement. "This legislation builds a framework for a Florida-based solution that gives flexibility to homeowners. This will put Florida at the forefront of addressing this issue nationwide.”
Rep. Larry Ahern, R-Seminole, is expected to file the House companion bill in a couple of weeks.
The two held a press conference Tuesday at the Pinellas Realtor Organization in Clearwater to announce the legislation.
John Sebree, senior vice president of public policy for Florida Realtors, supported the proposal, saying the state can't wait for Congress to act on requests to delay the increase.
"First of all, we can't wait around for Congress to act -- they didn't in 2013 and what if we wait and wait and they don't do anything in 2014," Sebree said in an email. "Even if Congress were to delay implementation of Biggert-Waters there would be uncertainty about premium increases and it is a win-win to promote the private sector jumping into this business in a big way."
Sebree added that getting more insurers in Florida would both reduce the size of the federal program and expand the private market.
Sam Miller, executive vice president of the Florida Insurance Council, was supportive of the effort but said he was still reviewing Brandes' proposal.
"We know there is some appetite on the part of private insurers, but just how much remains to be seen," Miller said in an email. "Whether the private market -- which has been unable to write this peril in the past can suddenly do it in a significant manner is an unanswered question."
Brandes has been working with the state Office of Insurance Regulation, bankers and insurers on the legislation since early November, as a bipartisan group in Congress has struggled in efforts to delay the implementation of the Biggert-Waters act.
The 2012 act requires the Federal Emergency Management Agency and other agencies to make a number of changes to the way the National Flood Insurance Program is run, including raising rates to reflect true flood risk and to make the program more financially stable.
The federal program was created by Congress in 1968 to provide coverage where it was unavailable from the private market and to reduce the amount of financial aid the federal government would have to pay after a flood-related disaster.
In September, Florida Realtors outlined nightmare scenarios in which some properties in Pinellas County could see a jump in premiums from $3,000 a year to more than $30,000, eventually impacting "Florida's economic rebound." The Florida Bankers Association has warned that the higher costs could eventually impact lending.
The proposal by Brandes and Ahern would require adding projected flood losses to the factors that must be considered by OIR when reviewing rate filings.
A key part of the proposed legislation would allow policyholders the choice of covering the outstanding balances of their mortgages, the replacement costs of their properties or the actual cash values of their properties.
Brandes' proposal declares that because Biggert-Waters will prevent many property owners from obtaining affordable coverage the state "has a compelling public purpose and interest" to protect the economy by "promoting the availability of flood insurance from private market insurers at potentially lower premium rates.
Brandes' proposal is expected to first be heard by the Senate Banking and Insurance Committee in January.
The legislation comes as Tampa-based Homeowners Choice Property & Casualty Insurance Company Inc, was approved Dec. 5 by OIR to offer flood insurance coverage to its Florida policyholders.
The company announced last Thursday the coverage is expected to be priced similarly to what Florida residents were paying before the Biggert-Waters Act.
"We will enter the market cautiously and focus on our strict underwriting guidelines and calculated risk management," Scott Wallace, Homeowners Choice's president, said in a release.