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Tuesday, Nov 25, 2014
Commentary

Congress should look to Florida for flood insurance lessons


Published:

The Florida Wildlife Federation’s involvement in the topic of subsidies or development in low-lying areas stems from the immense habitat and storm protection values of these lands. One of our campaigns is to protect valuable coastal wetlands as storm barriers and as wildlife habitat. Unfortunately, state and federal insurance subsidies have encouraged development in these areas, and we must act now to reform them.

Lawmakers on Capitol Hill debating whether to delay flood insurance reforms could take a lesson from Florida, where legislators recently approved depopulating its state-backed insurance company, Citizens Property Insurance Corp., which in turn reduces the state’s exposure and shores up its ability to pay out claims in the event of future catastrophic storms.

The National Flood Insurance Program is nearly $25 billion in debt due to a series of devastating storms across the United States the past few years. It is desperately in need of the same reform efforts to reduce exposure in order to remain financially stable. Last year, federal lawmakers appeared to recognize this growing crisis by overwhelmingly passing the Biggert-Waters Insurance Reform Act, which included higher flood insurance rates in high-risk areas, among other reforms.

Now, with many of these flood insurance rate changes taking effect on Oct. 1, some members of Congress appear to be buckling under pressure from reform opponents, with some calling for delaying these much-needed rate increases by as much as five years.

Current flood insurance premiums under NFIP are outdated and highly subsidized. Some homeowners pay as little as 40 percent of the true market rate despite living in flood-prone areas. The result of these artificially low rates is predictable: overdevelopment of dangerous coastal and flood-prone areas and an increasingly insolvent flood insurance program that can’t keep up with claims.

These problems are not unique to NFIP. Citizens, the Florida insurer, has also long subsidized highly vulnerable areas at rates far below market rates. Thanks to some good luck — almost eight straight years without a major hurricane — the program has been able to avoid the types of financial problems plaguing NFIP. In fact, Citizens has actually accumulated a $6.3 billion surplus.

But even with this funding buffer, Citizens’ officials and state lawmakers have feared the financial toll of the next inevitable massive storm and have taken steps to protect the program by allowing rates to rise closer to true market levels — essentially the same remedy included in the federal Biggert-Waters legislation.

According to FEMA’s estimates, 87 percent of FEMA’s customers in Florida will not be affected by Biggert-Waters. For those who will be affected, such as fixed- and low-income policyholders, affordability measures should be assessed, such as adopting targeted, means-tested, and temporary assistance outside of the rate structure and paid for within the program. In addition, mitigation assistance could be provided and should be prioritized for low-income policy holders affected by rate increases.

Congress can do more to give these families peace of mind by providing targeted assistance paid for within the flood program and using part of FEMA’s mitigation funding to reinforce properties affected by higher rates. Congress should look at supporting mitigation as a way to not only address rising flood insurance premiums, but as a way to better development strategies.

The worst possible solution would be to delay or roll back the new rates prescribed by Biggert-Waters. Such a move would only result in even higher premiums and a greater financial toll in the future. This is a difficult pill to swallow, but the reality is that we need to take steps now to prevent financial ruin in the future. Citizens’ Insurance and state legislators in Florida have realized this reality. Congress should follow their lead and do the same.

Reform of Citizens and NFIP will encourage development away from vulnerable areas. This will help us move forward in protecting valuable coastal wetlands and low-lying flood-prone areas as storm barriers and as wildlife habitat.

Sarah Owen Gledhill is the Northeast Florida planning advocate for the Florida Wildlife Federation.

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