Biggert-Waters Reform Act: Brandes to File Flood Insurance Legislation
Published: Wednesday, December 11, 2013
TALLAHASSEE | State legislation aimed at easing Florida's flood insurance predicament would streamline the approval process for new insurers and give consumers more flexibility in choosing coverage to reduce their rates.
State Sen. Jeff Brandes, R-St. Petersburg, told the Senate Banking and Insurance Committee Tuesday that he is close to filing a bill intended to encourage private insurance companies to offer flood insurance in Florida.
The state legislation was prompted by changes in the federal flood insurance program brought on by the Biggert-Waters Flood Insurance Reform Act, which took effect on Oct. 1 and is designed to raise rates to address a $24 billion deficit. But the changes have resulted in skyrocketing rates for some Floridians insured through the National Flood Insurance Program, raising concerns about the impact on the state's critical real estate market.
Richard Koon, a deputy commissioner of property and casualty in the state Office of Insurance Regulation, told senators that about a dozen bills have been filed to revise the Biggert-Waters law, but none are moving quickly.
"We don't expect a whole lot on the federal front, at least any time soon," Koon said.
Brandes' legislation would encourage private insurers to offer an alternative to the federal flood coverage by making changes in what is known as "the residential surplus lines insurance" market, a less-regulated form of coverage that is not subject to many of the requirements facing standard insurance companies, including rate regulation.
In addition to trying to streamline the approval process for letting companies offer flood coverage, Brandes said his bill would also let consumers make coverage choices that could lower their rates, such as deciding whether to insure their homes for the mortgage amount or opt for a full replacement coverage.
Many homeowners are currently caught in a bind by the flood rate increases because, regardless of affordability, their mortgage requires them to carry flood coverage.
Brandes said even if Congress eventually makes some changes in the federal law, he expects it to only offer temporary relief by delaying some provisions. He said changing the state law to open up the market to private insurers would provide a long-term solution.
"We need a strong, thriving private market," he said.
Two private companies currently offer residential flood insurance in Florida. The Flood Insurance Agency of Gainesville is providing the coverage through a surplus-lines company, backed by Lloyd's of London, an international insurer. Homeowners Choice Property & Casualty Insurance Co. of Tampa has been approved by the state to begin offering flood insurance to its customers beginning next month.
Brandes said he believes many other insurers would consider the market based on the fact that Floridians have received only $1 in claims for every $4 paid into the federal flood insurance program since its inception in 1978.
"When you see those types of numbers we understand that companies can come in to Florida and provide a great service, be profitable, be actuarially sound and can try to mitigate some of these onerous rates," Brandes said.
Private insurance companies already provide flood coverage for commercial properties.
Locke Burt, chairman of Security First Insurance and former state senator, said those private companies would be interested in the residential coverage if state and federal regulations can be revamped.
Burt said his recommendation is to write a state law outlining the rules and regulations for residential flood insurance that separates it from the traditional homeowners' insurance policies.
Secondly, Burt said the state will have to get assurances on what the federal government would accept in terms of private flood insurance and what would be acceptable to banks and other lenders that finance homes. "That's going to take a while," Burt said.
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