Top Florida Stories of 2016: Florida’s Evolving Flood Market

By | December 16, 2016

Before McCarty announced his decision to leave office, he initiated dialogue with the Federal Emergency Management Agency (FEMA) over the National Flood Insurance Program’s rate making. Citing the fact that the flood insurance rates Floridians pay are the highest in the nation, McCarty said the rates are unfairly discriminatory.

Florida accounts for 37 percent of the NFIP’s policies, mainly because of a requirement by lenders that residents have flood insurance, but McCarty said the state has paid out “far more than what we have gotten in return,” and pays disproportionately higher rates than the rest of the country.

Florida faces a significant flooding and storm surge risk. According to CoreLogic’s 2016 storm surge report, Florida ranks first in the country with 2.7 million homes at risk to storm surge flooding.

The state has worked on developing a more substantial private flood insurance market so residents can adequately address their risk at more affordable premiums. Legislation enacted by the state in 2014 that streamlines the process for private insurers to offer flood coverage has led to a growing private market.

This year, companies like Tower Hill and Assurant launched private flood options. HCI Insurance started a flood company called TypTap that only writes standalone admitted flood coverage.

What’s Next

Industry experts say until FEMA provides its ratemaking data Florida cannot establish a competitive private market.

“These carriers have to get reinsurance but they need the data from the NFIP to do so,” FAIR’s Handerhan said. “We need that data for the industry to develop.”

FEMA has declined to provide the data citing privacy concerns for its policyholders as the main reason, but critics have dismissed that answer saying there are ways to give the data without releasing personally identifiable information.

At an OIR industry conference in October, Roy Wright, head of the NFIP and deputy associate administrator for insurance and mitigation at FEMA, said the program has failed to put customers first.

According to the website Floridapolitics.com, Wright said the NFIP has focused on the companies and “lost track of the 5.1 million policyholders we’re here to serve.”

How that translates into addressing Florida’s high flood insurance rates remains to be seen, but Floridapolitics.com noted Wright said he has initiated a thorough review of the NFIP’s operations, which has so far found that “rates change without sufficient explanation to policyholders.”

Florida State Sen. Jeff Brandes announced in early December he will file a bill to fund flood mitigation efforts in the 2017 session, according to Floridapolitics.com. The website reported that Brandes said the legislation would create a matching grant program, in part through the state’s Land Acquisition Trust Fund, for “local projects (that) reduce flood risks and acquire conservation land for the purpose of mitigating flood risk,” Brandes’ office said in a statement.

The goal, Brandes said, is to help residents lower their insurance premiums through flood preparation and mitigation projects.

In a statement to Insurance Journal, Florida Insurance Commissioner David Altmaier said OIR will keep working with FEMA and private insurers to ease the flood insurance burden on residents.

“The Florida Office of Insurance Regulation remains committed to fostering the development of a private flood insurance market to provide options and choice for Floridians,” Altmaier said. “To that end, we are continuing to work collaboratively with other state insurance regulators and the NFIP to evaluate available data and identify barriers to the facilitation of a private flood insurance market.”

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About Amy O'Connor

O'Connor is the Southeast editor for Insurance Journal and associate editor of MyNewMarkets.com. More from Amy O'Connor
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