Florida laying framework for private flood insurance marketplace

By: NANCY SMITH | Posted: January 9, 2014 3:55 AM

A bill described as laying the framework for a private marketplace in Florida for flood insurance steamed forward Wednesday, winning unanimous support in the Senate Committee on Banking and Insurance.

What's propelling it are the sharp increases in federal flood insurance rates not only distressing coastal homeowners but beginning to hurt property values and housing sales in areas just beginning to recover from the recession. 

The problem is, the Biggert-Waters Flood Insurance Reform Act, being rolled out in stages, removes subsidies that keep federal flood insurance premiums artificially low for more than a million policyholders around the country. It's a discount that was applied to properties that existed before the drawing of flood insurance rate maps.

With the discount gone, rates will rise -- some astronomically.

In some communities, for instance Key West and St. Petersburg Beach, home sales have virtually ground to a halt just as the crush of the recession was beginning to fade. That could get worse when FEMA begins to phase out subsidies for condo owners in these flood zones, a decision it has put off for now.

The New York Times tells of a St. Petersburg Beach couple who put their house on the market only to find a new buyer would immediately face the new flood insurance rates on the property, which have jumped from $800 a year to $8,500 a year.

SB 542, Flood Insurance, the bill that moved forward Wednesday, is sponsored by Sen. Jeff Brandes, R-St. Petersburg.

The bill is intended to create a wide range of flexible options for policyholders so they can reach an affordable level of coverage for their property.

The hallmark of the proposal is that it allows policyholders to decide whether they want to cover the outstanding balance of their mortgage, the replacement cost of their property, or the actual cash value of the property.

The legislation likely will get a push all the way through to the Senate floor and beyond. It is the product of extensive work between consumer groups, insurers, the banking industry, and real estate professionals, and it ensures consumers are protected in the new flood insurance marketplace.

“In Washington this week Congress is debating a four-year delay to the drastic rate increases to flood insurance from the Biggert-Waters Act," said Brandes. "We can’t rely on Congress to fix this ... we must ensure Floridians are protected from egregious rate increases.”

He said, “This legislation puts consumers in charge and it offers flexibility to families struggling under the burdens of failed federal policies.”

Senate President Don Gaetz, R-Niceville, likes the bill. “The federal government has proven incapable of running a financially sound flood insurance program, necessitating the development of a private market for flood insurance in Florida,” Gaetz said in a written statement after the committee vote. “I commend Senator Brandes for developing a common-sense market-based solution to the problem of flood insurance in our state and I’m grateful to the members of the committee who supported his legislation today.”

Majority Leader Lizbeth Benacquisto, R-Fort Myers, a bill co-sponsor, added her praise. “I applaud Senator Brandes for working toward a positive solution to the staggering increases in flood insurance prices that many Floridians are facing. By allowing for private-market flood insurance solutions, Senator Brandes’ bill will provide more options for policyholders that fit their individual needs. The laudable goal of SB 542 is to help keep hard-working Floridians in their homes.”