Flood insurance rate delays opposed

cschelle@bradenton.comJanuary 9, 2014 

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U.S. Congressman Vern Buchanan addresses the audience during a National Flood Insurance Reform Program town hall meeting in December at New College of Florida's Sudakoff Center in Sarasota. The meeting featured Susan Wilson, Chief of FEMA's Floodplain Management and Insurance Branch. GRANT JEFFERIES/Bradenton Herald

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WASHINGTON -- A coalition of Washington lobbyists and think tanks is pushing Congress to defeat a bill that would delay dramatic increases for National Flood Insurance Program rates.

Smarter Safer, a group of insurance and environmental groups formerly called Americans for Smart Natural Catastrophe Policy, instead is lobbying for a targeted income-based reform of the Biggert-Waters Act to lessen the burden on taxpayers.

The Homeowner Flood Insurance Affordability Act of 2013, the most recent bill attempting to delay the latest flood insurance increases from the Biggert-Waters Act, is expected to be voted on next week in the Senate. If it passes, it would delay rate hikes for four years, after the Biggert-Waters Act expires in 2017.

Citing a Congressional Budget Office report released Tuesday, the coalition pointed out that if the Senate bill is approved as written, the $2.1 billion loss to the flood insurance program over the next 10 years will cause Congress to bump up against the borrowing cap, potentially creating problems paying out claims. Overall, the National Flood Insurance Program has a $28 billion loss so far.

Senate Bill 1846 is backed by Republican Sens. Robert Menendez of New Jersey and Johnny Isakson of Georgia, and has also found support from Sen. Bill Nelson, D-Fla.

"Basically this bill will make the flood insurance program operate on a hand-to-mouth basis as far as paying claims," said Steve Ellis, vice president of Taxpayers for Common Sense, during a conference call Wednesday. "It's not responsible. There are responsible ways."

But Floridians and Manatee County residents affected by the increased rates feel like they'll be the ones living hand-to-mouth if the sudden hikes aren't eased. Florida has the most flood insurance policyholders in the country, at more than 2 million, and Manatee County has the 10th-most subsidized policies statewide at an estimated 11,264.

Homes on Anna Maria Island and along the coast are seeing increases as much as 600 percent, while some Florida homes are seeing increases beyond 1,000 percent.

The latest round of increases took effect Oct. 1, in some instances raising prices on policies by thousands of dollars for homes in special flood hazard areas. When policies renew, homes built below base flood-line elevation, and before Dec. 31, 1974, when the first flood maps were made, will get hit with the greatest rate increases. New Manatee flood maps that go into effect March 17 will also increase some rates.

R.J. Lehmann, a senior fellow at free markets think tank R Street Institute, said the proposed legislation to delay insurance increases would subsidize wealthy homeowners at the expense of all taxpayers. Homes in the wealthiest counties in the program are 3.5 times more likely to file claims, and received $1 billion more than those in the poorest counties, according to the Institute of Policy and Integrity.

Instead, an income-based or means-tested solution should be created to help homeowners who truly need subsidized rates, Lehmann said.

"We support making targeted changes to the program with the reforms that would allow people of legitimate concerns to afford their flood insurance, so no one is thrown out of their homes because they can't afford their flood insurance," Lehmann said. "We don't think a blanket delay is the answer."

What the coalition is suggesting is really nothing new, said Max Goodman, spokesman for Rep. Vern Buchanan, R-Sarasota. The Biggert-Waters Act's affordability study was supposed to provide a way to slow the financial impact to policyholders, but it has yet to be delivered, he said. Smarter Safer is also pushing for the Biggert-Waters Act's affordability study to be completed.

"We're open to any reasonable solution," Goodman said.

Buchanan is a sponsor of the House version of the bill, the Grimm-Waters-Richmond Homeowner Flood Insurance Flood Affordability Act, as well as another bill called the Flood Insurance Relief and Transparency Act.

Buchanan is also expected to lead a closed-door meeting with the Florida congressional delegation Thursday morning to discuss strategies to fix the flood insurance program.

Nelson, a supporter of the Senate bill, said at a Tuesday press conference that fixing flood insurance is important to Florida.

"I wanted to stand here because I want to show you that there are 40 percent of all policies, flood policies, in the state of Florida. So are we affected? You better believe it. And folks like Mrs. Ross, the head of the Chamber of Commerce right down here in Bonita Springs near Naples, is feeling it," Nelson said pointing to a flood map of the United States.

"Or talk to David Clapp, a Realtor in Sarasota. His real estate market has dried up. Why?" Nelson asked. "He actually put together a deal. The premiums were $1,600 and now they're $6,000 -- he kept that deal. But what about the deal up here in Pinellas County? They were $4,400, they're now $44,000.

"So you see the impossibility of being able to conduct business particularly when people need to sell their homes and people need to buy homes."

Lehmann doesn't buy arguments about the effect on real estate.

"The consensus from the Florida Association of Realtors is that home sales will climb another 10 percent this year, and appraised values will rise 5 percent and median sale prices will rise 12 percent," Lehmann said, looking at statewide data instead of coastal real estate data. "The sort of hand-wringing of the impact of changes on the real estate markets doesn't seem to be borne out of the data."

Much of the push in Washington to suddenly delay the increases is posturing for an election year, contends Jimi Grande, a senior vice president of federal and political affairs for the National Association of Insurance Companies.

"We as an industry work very hard for a long time to get the Biggert-Waters legislation passed," he said. "Right now, I think what we're seeing is the worst that Washington, D.C., has to offer, which is allowing short-sighted local politics to trump sound long-term policy that is best for America, best for taxpayers and best for people who own homes that are at risk and need flood insurance."

Grande and Ellis laud Florida's junior senator, Marco Rubio, who hasn't publicly proposed any changes yet, for what they consider a quiet approach to flood insurance reform.

"We visit with his office on a regular basis and talk about flood insurance," said Grande, who considers Rubio an ally. "I can say that I know he is deeply interested in the NFIP, how it works and that it becomes a more like an insurance program and that is a sustainable program."

Rubio is "holding firm and thinking about responsible solutions that could actually benefit policyholders and the taxpayer," Ellis said.

"When this came out, he said he wanted to have a responsible solution," Ellis said. "He clearly is trying to be thoughtful about this and not do a knee-jerk response -- which a four-year delay -- that really doesn't accomplish anything except for delaying the rate increases."

Charles Schelle, Herald business reporter, can be reached at 941-745-7095. Follow him on Twitter @ImYourChuck.

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