Yards flooded at Last Resort

Waters from the Homosassa River extend through the yard where homes on stilts stand at The Last Resort in Homosassa in 2018.

Florida’s businesses and homeowners are seeing double-digit rate increases as high as 45% in property insurance premiums as insurers cite ballooning reinsurance costs, “loss creep” from 2017-18 hurricanes and coastal flooding among factors driving up costs.

But more than 1 million — at least — of 1.729 million Florida properties covered under the National Flood Insurance Program (NFIP) are going to see additional significant boosts beginning next year in flood insurance rates under the Federal Emergency Management Agency’s (FEMA) Risk Rating 2.0 program that went into effect Friday.

Flood damage is not covered under standard home insurance policies. The NFIP was created in 1968 by Congress to provide federally subsidized policies to landowners in flood-prone areas with rates set by FEMA. Flood insurance is only mandatory for mortgaged property in those flood-prone areas.

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More than one-third of 5 million NFIP policies nationwide cover Florida properties. According to a 2019 report by the Insurance Information Institute (III), the 1.729 million Florida policies include 118,000 businesses that own $500 million in property.

Under the new NFIP Risk Rating 2.0 system, introduced last April, FEMA estimates about 77% of those enrolled in the program nationwide will see flood insurance rates increase in policy renewals after April 1, 2002.

FEMA maintains the new program will engender more “equitable” and “informed” rates by considering a property’s cost to rebuild and other factors to generate a “true flood risk.”

A ZIP code breakdown on FEMA’s website shows about three-fourths of the nation’s NFIB policyholders will see an increase in flood insurance of about $10 per month.

But that average increase may not be relevant across vast swaths of Florida. According to a 121-page February analysis by First Street Foundation, a New York-based research nonprofit, NFIB rates Floridians pay are significantly underpriced.

The 1 million-plus Florida properties among 4.2 million “major flood risk” properties nationwide should pay 4.5-times current NFIB rates to be “properly” insured, First Street maintains, adding more than 400,000 Florida properties are in designated flood zones where landowners should pay 380% more in premiums to cover “actual risk.”

FEMA, however, caps annual NFIB rate hikes at 18%. That means, First Street Foundation projects, affected Florida property owners could see consecutive years of annual double-digit rate hikes to bring them “in line with projected risk.”

The 2012 Biggert-Waters Flood Insurance Reform Act proposed the last NFIB hike. The bill failed because it sent coastal premiums skyrocketing: a $1,900 annual premium on a $300,000 house in the Florida Keys would have leaped to $49,000 under the bill.

There is significant bipartisan opposition in Congress to allowing the new rate scheme from being implemented next April, including a House bill that would prohibit FEMA from reducing subsidized rates without lawmakers’ approval.

U.S. Sen. Marco Rubio

U.S. Sen. Marco Rubio

Florida U.S. Sen. Marco Rubio is one of four Republican senators from Southeast coastal states sponsoring The NFIP Risk Rating 2.0 Delay Act of 2021, which would push implementation back to Sept. 30, 2022.

“The Biden administration’s decision to move forward with implementing Risk Rating 2.0, in spite of the serious concerns my colleagues and I have voiced about its ability to do so in an organized manner, is concerning,” Rubio said. “With 80% of Floridians and American policyholders projected to see increases in their flood insurance premiums, FEMA needs to be more transparent and ensure its rollout is as orderly as possible. The Senate should pass my bill to delay this new rating system while Congress develops meaningful solutions to put NFIP on track to fiscal sustainability.”