Manatee County must brace for a tsunami of property insurance rate hikes

June 30, 2013 

Several tidal waves of property insurance rate hikes will be coming ashore soon, sure to swamp Manatee County home and commercial real estate owners in the most perilous of locations.

Not only is Citizens Property Insurance Corp. proposing to raise premiums -- again -- the National Flood Insurance Program is poised to dramatically increase rates on low-lying properties and scale back on subsidized premiums.

Living in Florida, especially in flood-prone neighborhoods, will be far more expensive. The impact on the state's economy will be detrimental as potential new residents and businesses opt for cheaper places to live and operate.

As expected, Citizens will continue to increase premiums and shed policies as the state-owned insurer of last resort works to become more "actuarily sound" and downsizes by hundreds of thousands of policies to reduce risk. While that makes sense from a business perspective, the subsequent blow to the economy makes this strategy less sound.

Citizens decided Wednesday to boost premiums in 2014 by an average of 6.2 percent on homes, 8 percent on condominiums and 9.1 percent on commercial properties. Though state insurance regulators must approve, the rubber stamp awaits. Manatee County property owners account for some 27,500 Citizens policies for both residential and commercial buildings.

The Federal Emergency Management Agency is also pursuing financial stability for the National Flood Insurance Program, as required by a law that went into effect in July 2012. Owners of low-lying properties will see their less expensive, subsidized flood insurance skyrocket -- up to 20 percent annually for older homes as communities update and adopt new flood insurance rate maps.

Investor-owner properties will get socked with 25 percent increases for years until rates match the "full rate risk" for flooding, that being the magical "actuarily sound" level. And once a residential or commercial property is sold, the buyer will bear the full rate after Oct. 1 -- with premiums possibly tripling. Owners who purchased subsidized properties after the July 2012 reform law went into effect will also be subject to the full risk rate.

Manatee County is well into the mapping process with final approval tentatively scheduled for March 2014. This multiyear project to develop detailed flood hazard maps via new digital mapping techniques will reveal the changes brought about by water flow and drainage patterns since the previous maps were created almost 30 years ago.

Manatee's proposed maps can be viewed on the county website, www.mymanatee.org.

Like Citizens, National Flood Insurance Program rate increases had been capped at 10 percent a year. Florida lawmakers prevented Citizens from exceeding that cap this year after a firestorm of protests from consumers about the potential for far higher increases.

Congress, however, adopted tough reforms for flood insurance in the wake of Hurricane Katrina, which put the NFIP some $18 billion in debt. The 10 percent cap no longer applies. Property owners who enjoyed sub-market premiums for years and years are losing those cheaper rates in order for the flood insurance program to become solvent.

Three years ago, Manatee County trumpeted the news that 12,000 flood insurance policy holders inside high-risk, 100-year floodplains would save as much as $200 a year on premiums since the county improved its flood risk rating.

The county managed to score a higher rank based in part on improvements in stormwater management, the utilization of a mitigation strategy designed to reduce flooding risks from natural and manmade hazards, and the adoption of a comprehensive plan amendment that placed 40 parcels into a less intense land-use category.

Such commendable floodplain management and environment protections will hopefully mitigate the pending property insurance crunch.

Florida has escaped a hurricane hit for a record seven years. But that matters not in the world of property insurance and risk management. Citizens currently holds enough money -- a record $6 billion -- to pay damages for a once-a-half-century hurricane. But that matters not in the world of actuarily sound business policies.

This is sure to have a big impact on Manatee County's tourism industry and property sales as visitors and homeowners absorb the higher costs of enjoying waterfront vistas and flood-zone living. The real estate and construction industries could take a hit.

We encourage property owners to check the county website for flood-risk information and maps, and also talk to their insurance agents to prepare for the changes in insurance. The online version of this editorial contains direct links to the county's risk information and maps.

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