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homeowner’s policy? Or will the trigger be one or two homeowners who decide to sell defensively?” Rethinking Flood Insurance As many Florida homeowners know, flood insurance rates have risen in Florida recently. The sharply higher insurance rates are an attempt to stabilize the federally backed National Flood Insurance Program (NFIP), which was financially decimated by Hurricane Katrina in 2005 and Superstorm Sandy in 2013, leaving the insurer of last resort more than $23 billion in debt to the U.S. Treasury, according to a Government Accountability Office report. “The federal flood insurance is going broke,” said Young, the coastal geologist. “At some point, this bubble of federal subsidies will collapse. Let’s face it, the vast majority of those properties on barrier islands aren’t primary residencies; they’re investment properties. If you’ve got a $4 million beach-front house, flood insurance isn’t going to help you.” To plug the deficit in the federal flood insurance program, Congress passed the Biggert-Waters Flood Insurance Reform Act of 2012, a law that removed the subsidies on about 20 percent of policies nationwide for homes that were built prior to 1975 and had enjoyed grandfathered, low flood insurance rates.
homeowners, sparking premiums to nearly triple in 2013.
“There’s no doubt that premiums are going up,” said Brosman, referring to flood insurance rate hikes. “We do a ton of business in Florida.” Brosman said the insurance market in Florida is extremely challenged by the state’s exposure to risks from flooding, coastal storms and high winds. “There’s no question that people are putting a lot more focus on this issue,” said Brosman, referring to the risk of flood damage to properties and rising flood insurance premiums. “There’s increasing risk for both lenders and borrowers, including legal and regulatory risks.” The Sunshine state has the largest number of policies under the federally- backed flood program; there are some 2 million federal flood insurance policies in Florida, more than any other state, and more than one-third of the overall total
To plug the deluge in premium hikes, Congress passed the Homeowner Flood Insurance Affordability Act of 2014, which repealed and modified certain provisions of Biggert-Waters, reducing rate hikes and removing the provision in Biggert- Waters in which the buyer of a subsidized home would lose the flood insurance subsidy entirely. Flood Insurance Rate Hikes However, the two-year reprieve on steep premium increases for thousands of homeowners has expired, and there is no end in sight for rising bills that could double or triple over the next few years. Now some insurance policies on subsidized second homes are going up more than 20 percent. Meanwhile, premiums for primary residences are going to increase by 10 percent, experts claim.
There’s no question that people are putting a lot more focus on this issue. There’s increasing risk for both lenders and borrowers, including legal and regulatory risks.”
Denis A. Brosnan | President and CEO of DIMONT
Denis A. Brosnan, president and chief operating officer of DIMONT , a provider of insurance-related services to the residential and commercial mortgage industries, said flood insurance premiums are rising rapidly in Florida.
of more than 5.6 million insurance policies nationwide, according to The Federal Emergency Management Agency (FEMA), who administers the NFIP program.
But Biggert-Waters triggered higher insurance rates for many Florida
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