The best way to fix the state’s looming flood insurance crisis is to create a marketplace that makes it easier for private companies to sell policies. State Sen. Jeff Brandes, who pushed last year to create a private market, is back this year with another proposal that would give private companies and customers a range of coverage options while at the same time giving assurances to lenders that the policies meet or exceed those offered by the federal government.
The proposal would also build an accurate database of flood elevations in the state’s counties, rather than rely on a flawed federal effort that has been stalled for years.
Brandes, a Republican from St. Petersburg, should be applauded for continuing to attack an issue that caused panic a couple of years ago as changes to the Federal Flood Insurance Program threatened to slam tens of thousands of Florida homeowners with huge rate increases.
In many instances, the homes weren’t near the water and of modest value, exposing flaws in a federal program that had fallen $24 billion in debt.
State Rep. Larry Ahern, a Republican from Seminole, is sponsoring a companion bill in the House. “It’s about finding ways to reduce premiums,” he says. “Let’s get this thing going in the right direction.”
The crisis over flood insurance premiums erupted after Congress passed the Biggert-Waters Act, which targeted the unsustainable subsidies offered under the Federal Flood Insurance Program.
But eliminating the subsidies meant thousands of property owners were suddenly faced with flood insurance bills that were 10 times or 20 times more expensive than the previous year. The sharp increases left many homeowners in financial peril and threatened to drive buyers away from property sales at a time when the housing recovery was beginning to rebound in Florida.
Congress reacted by passing legislation that lessened some of the increases and delayed or softened the crisis for many homeowners, but that left commercial property owners and the owners of second homes without relief.
Now the trick is to create laws and policies that will provide affordable flood insurance without government-funded subsidies, and that will reflect the actual risk.
Attracting private insurers into the market is the most reasonable solution. As the Tribune’s Josh Boatwright reports, the bills by Brandes and Ahern would attempt to lower premiums by providing plans that cover only the value of a home’s mortgage, rather than the full replacement cost. Or policies that could exclude a detached garage from the coverage. The idea is to provide choices for property owners that might be more affordable.
In Congress, U.S. Rep. Dennis Ross, a Republican from Lakeland, and U.S. Rep. David Jolly, a Republican from Indian Shores, are considering ways to encourage lenders to accept private insurance coverage on mortgages backed by Fannie Mae or Freddie Mac.
And Jolly has filed a bill to bring immediate relief to the owners of second homes and commercial property owners passed over in the fix Congress passed last year.
The need to fix the flood insurance market is particularly acute in Florida, which is home to 37 percent of all the policies written by the National Flood Insurance Program. Yet despite that outsized participation, the state has received just $3.7 billion of the $50 billion paid out by the federal government over the years. In other words, we are a huge donor state to a broken program.
Whether private insurers or lenders embrace the changes remains to be seen. But working to end the subsidies, eliminate the debt, and fashion policies that reflect the risk represent a sensible way forward.
