Groans, interruptions, occasional applause. That was the scene in the New Port Richey city council chambers last week when federal, state and local officials — led by U.S. Rep. Gus Bilirakis — pulled homeowners together to talk about what’s been a painful subject in recent months: flood insurance.
Premiums under the National Flood Insurance Program, a federal insurance plan administered by the Federal Emergency Management Agency, have skyrocketed since October when a federal law went into effect designed to help the program make up for losses from major disasters like Hurricanes Katrina and Sandy.
Implementation was designed to slowly ramp up increases for affected policyholders, but what has actually happened has been much different.
One homeowner on the west side of Pasco County got a rude awakening soon after purchasing his waterfront property in April.
“I have a $2,500 monthly mortgage, and now we’re talking about $2,000 a month more to pay for our insurance, and that’s not going to happen,” the resident said. “If we don’t get a fix, they are going to foreclose on my property. I cannot physically make my payment.”
For some NFIP policyholders, what were once annual premium amounts became their monthly payments, in many cases, creating situations where some homeowners would pay the entire value of their property in a little more than a decade, before turning around to start the process all over again.
Bilirakis, R-Palm Harbor, says he’s demanding immediate relief for those affected, especially in Florida which has traditionally paid out three times more than they’ve ever received in the program.
“We’re not going to rest until we get results,” said Bilirakis, who introduced what he calls the Homeowners Flood Insurance Relief Act last October. It’s expected to cap premiums at the value of a home at the time it was purchased, divided by 30 — the typical timeframe of a mortgage — and would cap annual premium increases the first 10 years at 10 percent.
“I think we have a real good chance of passing a version of the bill,” Bilirakis said. “I don’t care if it passes with my name on it or not, you guys need relief.”
Bilirakis, who sternly questioned a FEMA representative flown in from Atlanta to talk about the rates, had to answer some questions of his own, however. For one, why he voted for a 2012 bill widely blamed for current increases in flood insurance.
The Biggert-Waters Flood Insurance Reform Act of 2012 passed Congress and was signed by President Obama last year. The bill phases out government subsidies for premiums in long-standing policies, but caps the annual increases at 25 percent.
It was part of an overall transportation bill that overwhelmingly passed both the House and the Senate.
“We voted for the bill to save the program, but it has not been properly implemented,” Bilirakis said. “We need an NFIP until we get a viable private flood insurance.”
The bill instructed FEMA to, in part, conduct an affordability study for its proposed premiums before implementing the bill, Bilirakis said. Susan Wilson, chief of the Floodplain Management and Insurance Branch of FEMA, admitted the study had not been done, but only because there was no money to fund it.
Although the insurance program has been self-sustaining for decades, storms like Hurricane Katrina and later Hurricane Sandy threw the program into debt of more than $24 billion.
“Hurricane Katrina was anything but an average loss year, and everyone can agree with that,” Wilson said. “I spent many months in Mississippi, which was devastated by Hurricane Katrina, and there were a lot of losses paid out for claims.”
Before Biggert-Waters, the NFIP was different from private insurance companies as it was not allowed to maintain a reserve fund. With a reserve fund, the organization would have extra cash on hand in case more claims were paid than premiums received — like when Katrina or Sandy hit. Otherwise, the program has to borrow to pay claims, and premiums would have to rise to pay not only the additional money, but the interest for the loans, as well.
State Sen. Wilton Simpson, R-Trilby, said Florida is looking to help policyholders, as well. The bill he is co-sponsoring would allow private insurers to help with flood insurance in the state.
“This is the backstop to give homeowners options,” Simpson said. “Since this has become such a big issue for the state of Florida, we have started working on legislative solutions in Tallahassee.”
That bill is set to go in front of the state senate’s banking and insurance committee on Jan. 8.