Premiums rising for national flood program, though florida pales in payouts gas in oil causes

Owners of older homes in low lying areas aren’t off the hook, either. Some could face rate increases of up to 20 percent a year after their communities adopt new flood insurance rate maps as part of the program overhaul. Rate hikes used to be capped at 10 percent.

If a house or business is sold, the rate increases could be even more stunning. Anyone who has bought a rate-subsidized property after the new flood law was signed July 6, 2012, will have to pay the full rate for coverage after Oct. 1. That could be more than triple the price paid by the previous owner.

Chris Heidrick, owner of Heidrick and Co. Insurance in Sanibel, has tried to spread the word in his beachfront community. As a popular destination for second homes, Sanibel Island’s Lee County has the second-highest number of investor-owned properties being affected by the phaseout of flood insurance subsidies.

Officials with the Federal Emergency Management Association, which runs the flood program, have downplayed the impact. The phaseout of subsidies will affect fewer than 20 percent of flood policyholders, FEMA said. Even fewer will see rates triple in a year, officials said.

"The numbers aren’t hitting people’s mailboxes yet, but once they do, you’ll need a special edition of the Tampa Bay newspaper" to explain it all again, said David Thompson, a longtime staff instructor with Florida Association of Insurance Agents.

The storm plowed through the north Gulf Coast in 2005, leaving behind $16 billion in flood claims, primarily in Louisiana. The hurricane pushed the National Flood Insurance Program $18 billion in debt, forcing it to borrow from the government to stay in business.

To keep the flood program solvent for the long term, Congress overwhelmingly passed the 2012 Biggert-Waters act. The idea: focus the biggest rate hikes on investor-owned homes and older homes that have been paying sub-market rates for decades.

Staffers for Sen. Bill Nelson, a Democrat, said he voted for Biggert-Waters last year because the flood program was about to expire and needed reforms to stay solvent. Last week, he was seeking additional information from FEMA on the impact to Florida.

"But the bottom line is this: Though the flood insurance program may not be actuarially sound, tens of thousands of Floridians rely on it for affordable coverage — and, keeping coverage affordable for those in need is an important part of the equation," Nelson’s press secretary Ryan Brown said.

Republican Sen. Marco Rubio, who voted against the bill last year, said the flood program reminds him of Florida’s state-run Citizens Property Insurance: a government-run outfit that has to be financially restructured to become self-sustaining.

In the history of the flood program, Florida property owners have paid $16.1 billion in premiums while collecting just $3.7 billion in claims, according to a 2011 analysis by the University of Pennsylvania’s Wharton Center for Risk Management and Decision Processes.

Since 1978, Texas ($5.5 billion), New Jersey ($4.8 billion) and New York ($4.4 billion) have also received more payouts than Florida, while paying far less in premiums. And those numbers predate last year‘s Superstorm Sandy, which caused billions more in flood damage in the Northeast.

But most of the hurricanes that have struck Florida in modern times, including the grand-daddy, Hurricane Andrew in 1992, were more windmakers than floodmakers. Of the nation’s top 10 flood-claim events since 1978, only one (Hurricane Ivan in 2004) caused heavy damage in Florida.