'Astronomical' flood insurance rates affecting (Pennsylvania county)

BY JAMES LOEWENSTEIN (STAFF WRITER)

January 19, 2014

Sayre Borough "will be hit really hard" by the large increases in flood insurance rates that are going into effect nationally, state Sen. Gene Yaw said at Senate hearing in Harrisburg on Tuesday.

They are certainly not alone.

On Oct. 1, 4 million property and business owners nationwide saw their flood insurance premiums "skyrocket" as a result of Biggert-Waters Flood Insurance Rate Act, according to a press release that was issued by Yaw's office on Tuesday.

Annual flood insurance premiums on a $100,000 home now "could be in the $10,000 range," Dan Berninger, president and CEO of the Muncy Bank & Trust Company, testified at the hearing, which was streamed live on Sen. Yaw's website.

The hearing, which was chaired by Yaw and conducted by the Senate Banking & Insurance and Environmental Resources & Energy committees, was held to find out about the effects of the Biggert-Waters Flood Insurance Rate Act of 2012.

Others, including Yaw, testified about property owners paying even higher flood insurance rates.

Laurie Purtanove of Lycoming County testified that she and her husband had bought a commercial property in her hometown of Jersey Shore Borough in 2012 for $330,000, only to find that her annual flood insurance premium has now skyrocketed from $2,861 to $40,000.

Yaw said he talked to a Bradford County homeowner who had seen his annual flood insurance premium increase from $1,725 to $23,296.

The increases are occurring on properties that have been receiving federally subsidized flood insurance. Those whose homes were built before the National Flood Insurance Program was implemented in the early 1970s receive subsidized insurance.

The federal government, which is facing a $28 billion debt owed by the National Flood Insurance Program, is phasing out the federal subsidy on flood insurance for certain types of policy holders over a period of several years, said Lisa Schaefer, director of government relations for the County Commissioners Association of Pennsylvania.

However, the full, unsubsidized rates went into effect immediately for residential properties sold after July 6, 2012.

Residents whose primary home is in a Special Flood Hazard Area - defined as an area where the annual chance of flooding is .2 percent or greater - will get to keep their subsidized rate, unless the property is sold, the policy lapses, there is a severe, repeated, flood loss, or a new policy is purchased.

The Biggert-Waters Flood Insurance Rate Act, has, in effect, reduced the value of any property that has federally subsidized flood insurance to zero, because the property owners will not be able to sell those properties, since the buyer will have to pay the full, unsubsidized insurance rate, said Vincent Matteo, president and CEO of the Williamsport/Lycoming County Chamber of Commerce.

The implementation of Biggert-Waters Act has already dramatically reduced the sale of properties in floodplains in Pennsylvania, according to those who testified.

"In Lycoming County, since Oct. 1, 2013, we have not financed, and I am not aware of, any sales (of property) in the floodplain," said Berninger, who is a past president of the Pennsylvania Bankers Association.

In Bradford County, approximately one in every 100 housing units is covered by a subsidized federal flood insurance policy, according to the Center for Rural Pennsylvania, a state agency.

Berninger said he has heard of small business owners now facing annual flood insurance rates of $20,000 to $40,000, and he said that many of them will find those rates to be unaffordable.

"Something must be done to offer relief to those who are being hit with enormous, unaffordable increases in their premiums," state Sen. Don White (R-41) said. "The hearing shed light on this important topic and I hope it will encourage our colleagues in Congress to act quickly to resolve the current problem."

"Without a change to the current law, property owners across Pennsylvania will not be able to afford flood insurance, that's the bottom line," Yaw said. "We will see homeowners simply walk away from their homes and businesses. It seems to me this federal legislation was passed without thorough planning or good judgment."