TALLAHASSEE -- With thousands of homeowners locked in their homes because of spiraling flood insurance rates, Florida regulators are working on a program to lure private companies to write flood insurance in the state as an alternative to the federal program.
The Florida Office of Insurance Regulation is talking to insurance companies interested in coming to Florida and writing expedited flood insurance policies, Rebecca Matthews, department deputy chief of staff, told the Senate Banking and Insurance Committee on Tuesday.
"This is an issue that may need to be taken care of a little sooner than session," she said, noting regulators do not plan to wait until
legislators return to Tallahassee for the spring lawmaking session in March. "A handful of companies have shown interest."
State Sen. David Simmons, R-Altamonte Springs, chairman of the committee, said lawmakers must respond to the unintended consequences of the Biggert-Waters Flood Insurance Reform Act of 2012, which could harm the state economy.
"If there's money to be made in this and the flexibility is given to private enterprise, then we can get that started," he said. "The question, of course, is are we going to be able to do it fast enough?"
The act attempted to phase in a series of rate increases in the National Flood Insurance Program as a way to close the program's $24 billion deficit. The biggest hit will be to an estimated 268,000 Floridians whose homes were built before 1974 in high-risk flood zones. They lose subsidized rates when they sell their homes. For some homes, the increase could mean their rates will rise from $500 to $16,000, the committee was told.
Thousands of other homeowners, including many who purchased residences in the last year, also face soaring premiums because new flood maps take effect as a result of the act.
John Sebree, senior vice president of the Florida Realtors Association, told the committee the rate shock from the flood insurance rate hikes will scare buyers away from purchasing older homes and Florida's gradually recovering real estate market "could come to a screeching halt."
He urged legislators to consider a Florida insurance alternative, rather than wait on Congress, which has been unable to agree to delay the rate increases.
Simmons said if the private market can't respond fast enough, then the Legislature should consider creating an insurance pool of last resort that could offer rates lower than those provided under the federal program.
Nearly 2 million Florida homeowners carry flood insurance through the national program, making up 37 percent of the entire federal pool. In the last 20 years, Floridians paid $16 billion in premiums and saw less than $4 billion returned in claims. That seems to indicate that although Florida suffers from its reputation from windstorms, its flood risk is not as steep and might be profitable for private companies.
But insurance experts told the committee insurers would need extraordinary regulatory flexibility to enter the Florida flood insurance market because the federal program is not able to give them the data they need to determine how much to charge and assess their risk.
"The private sector has not written flood insurance because, when you start a company you have to have a 'me, too' filing of something that already exists," said Locke Burt a former state senator from Ormond Beach and an owner of Security First Insurance.
In Florida, no such company already exists.