In Maine, 3,300 Policyholders Likely to See Flood Insurance Rate Increases

By David Sharp | April 2, 2014

Thousands of Maine homeowners and businesses could see their rates for flood insurance rise as the federal government attempts to put the troubled National Flood Insurance Program back on sound financial footing.

Most of the communities with the largest number of policy holders seeing rate increases are on the coast, but the problem touches all of the state’s 16 counties.

About 3,300 in Maine are among the 1.1 million policyholders nationwide likely to see their federally subsidized flood insurance premiums rise, according to a review of federal data by The Associated Press.

President Barack Obama signed a law on March 21 putting the brakes on a 2012 overhaul that aimed to shore-up the program by requiring policyholders to begin paying risk-based rates, but the measure merely delays the premium increases.

Homeowners could pay up to 18 percent more annually until switching to a risk-based rate while business owners and those who own vacation homes will see their rates rise no less than 25 percent each year until their premiums reach rates matching what building elevation surveys indicate is the true risk of flooding.

The combination of costlier insurance, along with growing taxes, threatens to price people out of homes that have been passed down through generations.

Wells is one of Maine’s hardest-hit communities, with 115 primary residences seeing annual increases of up to 18 percent and 92 vacation homes or businesses seeing mandatory annual increases of 25 percent. Many property owners are renting homes to try to bring in extra income to avoid having to sell, said Bob Foley, a selectman and insurance agent.

“There are a lot of families that have owned their homes for many generations that are seeing the cost of ownership growing to the point where it becomes cost-prohibitive to keep them,” he said.

Fred Richardson, who has a home on Drake’s Island in Wells, said some of his neighbors are simply dropping their insurance policies, willing to take a risk in an area that rarely sees storm damage. But he said he’s keeping his insurance even though his premium is going up 25 percent annually.

“I fear that the year I decide to self-insure will be the year that something catastrophic happens,” said Richardson, 71, a retired electrical contractor who lives in Massachusetts.

Flood insurance is only mandatory if there’s a mortgage on the property. There’s no requirement for the insurance for homes that are paid off.

Congress created the National Flood Insurance Program in the late 1960s, in part because private insurers had abandoned the market. The subsidized insurance covers homes and businesses built in flood zones before there were many rules about building close to the water.

The problem, state officials say, is that Mainers who receive the insurance are paying the price for heavy losses incurred in southern states like Texas, Louisiana and Florida.

Kennebunkport, for example, is home to many pricy homes, including the Walker’s Point compound of former President George H.W. Bush. Bush’s home, which is covered by the insurance, was battered by a 1991 storm that knocked out windows, damaged walls and left mud and rocks strewn through the home.

But there have been only 145 homes declared to be total losses since 1978, said Werner Gilliam, director of planning and development in Kennebunkport, with a total payout of roughly $1.73 million.

Overall, the payout is tiny compared to the value of the waterfront mansions, he said.

Sue Baker, state coordinator for the national flood insurance program, agrees that Maine claims are small. There are only 160 properties in Maine with repeat claims, she said.

“That’s peanuts compared to the repetitive losses in the southern Gulf Coast states,” Baker said. “In Maine, we just have a drop in the bucket.”

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