With Rate Hikes Looming, Florida Weighs Private Flood Insurance Options

By Michael Adams | October 11, 2013
flood

  • October 11, 2013 at 2:08 pm
    Cheetoh Mulligan says:
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    The NFIP has a $24 billion deficit, and state governments are looking to get into the flood insurance business.
    Makes sense only when you play with other people’s money.

  • October 11, 2013 at 2:18 pm
    unjustifiedfloodrates says:
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    Homeowners that have never been flooded should not be expected to make up the deficit of the National Flood Insurance Program (NFIP) when FEMA gives, what appear to be unjustified, massive premium reductions to gulf front condominium buildings that have been paid millions of dollars in NFIP flood claims.

    July 6, 2012: The President signed the Biggert-Waters Act authorizing a five year extension of funding for the National Flood Insurance Program (NFIP). It was also intended to make the program actuarially sound. Implementation of sections 205 and 207 of the Biggert Waters Act are going to create tremendous rate increases for thousands of homeowners and small businesses along the entire gulf coast along with coastal properties around the country. This action doesn’t seem to be justified when you consider the fact that over the last three years FEMA approved Letters of Map Revision (LOMR) on Alabama’s Gulf Front condominium buildings that they had previously placed in the NFIP Repetitive Loss Program. These condominium buildings received millions of dollars in NFIP claim payments yet FEMA decided they are not in velocity flood zones and reduced their flood premiums by an average of almost 93%?

    2009: In 2009 a company out of South Florida, Flood Zone Corrections (FZC), started submitting condominium buildings located in very unfavorable “V” flood zones to the NFIP/FEMA in an attempt to have them changed to more favorable “A” flood zones. FZC also operates as Flood Risk Solutions. All of these buildings were located on the beaches of Orange Beach and Gulf Shores, Alabama. FZC submitted the buildings even though they were located in high velocity flood areas. Local flood engineers said these buildings would not qualify for LOMRs and most refused to attempt any rezoning. Many of these buildings had been heavily damaged from flooding during Hurricanes Erin and Opal in 1995, Hurricane Danny in 1997, Hurricane Georges’ in 1998 and all of them suffered massive flood damage during Hurricane Ivan in 2004. If approved for LOMR’s these condominium buildings would pay flood premiums that were a very small percentage of what they were currently paying.

    Unbelievable: The Flood Plain Managers from Gulf Shores and Orange Beach assumed the NFIP would decline the request for LOMR’s because the NFIP was operating at an $18 billion deficit at that time and many of these buildings had already been placed in the NFIP Repetitive Loss Program. Both Flood Plain Managers disagreed with the information FZC was submitting to the NFIP and each one of them refused to sign concurrence letters that were required when applying for a LOMR. The NFIP ignored these Flood Plain Managers and approved the LOMR’s anyway.

    June 6, 2011: The NFIP/FEMA approved LOMR’s for four condominium buildings located on East Beach Boulevard in Gulf Shores. One of the buildings had received over $400,000 from the NFIP for their Hurricane Ivan flood claim. The other three were new buildings that were built on lots where the prior building had been destroyed by flooding during Ivan.

    June 2011: The offices of Alabama Senator Richard Shelby, Mississippi Senator Roger Wicker and Alabama House Representative Spencer Bachus were notified of the negative financial impact approval of the LOMR’s were having on the NFIP. All of these Congressmen were working on new legislation that would extend NFIP funding and each one had expressed considerable concern that the program was operating at a deficit of $18 billion. Their representatives contacted representatives of the NFIP and were assured the flood zone changes were justified. All three offices dropped the issue soon afterward.

    2011: The NFIP/FEMA was approached and asked to put a moratorium on future LOMR approvals until the new flood mapping project was completed for Alabama. The NFIP said they would review the issue. No moratorium was ever put in place and now the program operates at more than a $24 billion deficit.

    October 4, 2011: 14 more Gulf Shores condominium buildings are approved for LOMR’s

    June 4, 2012: 7 more Gulf Shores condominium buildings are approved for LOMR’s

    March 11, 2013: Although Biggert-Waters had already been passed with intent of making the NFIP actuarially sound, 41 more Gulf Shores condominium buildings are approved for LOMR’s

    June 17, 2013: Another Gulf Shores condominium building is approved for a LOMR

    December 6, 2013: Another Gulf Shores condominium has been approved and the LOMR will be effective on 12/6/2013

    September 2013: Based on the most recent edition of NFIP/FEMA flood maps there are 72 residential condominium buildings located in very unfavorable “V” flood zones in Gulf Shores alone. As of September 2013, FZC has obtained LOMR’s on 66 of these Gulf Shores condominium buildings while 2 were declined. FZC is currently working to secure LOMR’s on the remaining 4 buildings. There were also 4 or 5 high rise condominium buildings approved for LOMR’s in Orange Beach during that time.

    It appears the total combined annual revenue loss to the NFIP/FEMA for the condominium buildings in Gulf Shores and Orange Beach is somewhere between $5,500,000 and $6,000,000 a year.

    If the intent of Congress is to make the program actuarially sound why did they, and do they continue to allow the NFIP/FEMA to approved these buildings for LOMR’s without investigating this issue in detail?

    After LOMR approvals, the average flood premium for the approved gulf front condominiums is approximately $.069/$100. Most homes located in “X” non-hazard flood zones pay a minimum of approximately $0.12/$100. How can FEMA possibly justify charging these homes twice the rate?

    The new preliminary flood maps for Alabama and NW Florida are not scheduled for release until December of 2014. The new permanent maps will not be put into effect until 2015 but we already know the stillwater elevation is going up by 4′ along the entire Alabama Gulf Coast. With this knowledge there is no justification for FEMA to overlook the actions of the NFIP.

    When you look at the facts you question how the NFIP/FEMA, with a program operating at a $24 billion deficit, can justify any premium reduction on these high risk properties then proceed with the implementation of sections 205 and 207 of Biggert Waters? Obviously FEMA officials and Congress expect innocent homeowners and small business owners that followed FEMA’s rules to make up this deficit. Why doesn’t Congress or FEMA initiate an internal investigation and get to the bottom of this issue? Why don’t they delay the implementation of sections 205 and 207 until this investigation is complete? These condominium owners are receiving what appear to be extremely low unjustified flood rates at the expense of coastal homeowners around the entire country. No individual homeowner or small business owner should have flood premiums raised until Congress and FEMA get to the bottom of this issue.

    This has been happening throughout Florida for several years.

  • October 11, 2013 at 2:23 pm
    jimbo says:
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    I can image the sub-limits and exclusions. With the NFIP under water and more serious flooding each year in addition to more severe storms, it would not take long for private carriers to need a wall st. bail out.

  • October 11, 2013 at 4:19 pm
    cotyre says:
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    Without seeing the exact number- you have to wonder how much revenue could be generated and put into a pool by simply adding a fee to all other property insurance within the state. Assuming there are 5,000,000 homeowners and multiply that by $50 per policy- that would generate $250,000,000 itself. That doesn’t include commercial structures either.

    • October 14, 2013 at 9:21 am
      ExciteBiker says:
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      Per the article, Florida has over 2 million enrolled in NFIP, more than 1/3 of the program and over $1 bn in premium. It also cites a current NFIP deficit of $24 bn.

      There have been predictions about when and to what extent southern Florida will be underwater in our lifetimes. We will need to decide to what extent society and government should be responsible if and when we lose a major city like Miami to rising seas. Until we make some very difficult decisions, there may not be an effective solution to the NFIP problem. Count me among those who do not currently see the private market as willing or able to effectively address the size and scope of this particular issue.

  • October 14, 2013 at 3:07 pm
    Charlotte Greenbarg says:
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    I wonder how much of the problems in both Citizens and the flood insurance program are caused by fraud. Seems government isn’t really quick to find out. If it were their personal money, maybe they’d see it differently.

    If Citizens is trying to depopulate, why would they want to start another state insurance program?

  • October 21, 2013 at 1:32 pm
    No Doubt says:
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    @excite biker. If we can’t come to an agreement on Fed’l spending, how in the world do you think we’d ever find NFIP properly or deal with any global changes.
    Look at The Netherlands. They had a huge storm 50 years ago and built a massive flood control system rather than move away from low lying lands. Same thing in Venice Italy. Look for solutions like thaty to be tried in low lying areas rather than the more politically charged method of forcably moving millions of people away from bodies of water. I also remember seeing a recent National Geographic article on this topic and recall that some city in Europe is building homes on docks which of course rise and fall based on water levels rather than make people move where they don’t want to go.
    If that ever happens, then it won’t be until the water is knee deep on a dry day in some of these areas and its a real and actual threat to large numbers of tax payers. Buddy-we got at least 80 years based on the worst projections before we are even close to that-what politician is going to mortgage is future for some unborn voter? Oh and one last comment-our best scientists cant’t even get the number of hurricanes right in a small body of water like the Gulf of Mexixco and the Atlantic coastline in a given hurricane season that same year, then I REALLY don’t trust someone who is predicting doom 80 years out. The science ain’t there.



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