Relief from soaring flood insurance?
House approves bill to regulate premium increases; some fear it’s only a short-term solution
House approval of the Homeowner Flood Insurance Affordability Act on Tuesday is being hailed as a step in the right direction by waterfront homeowners and officials but short of a long-term solution to soaring flood insurance premiums.
“It’s a good thing that it got through the House,” Ward 5 Councilman Ed Ladouceur said yesterday. “Let’s see where it goes from there. How do they propose fixing the $24 billion? Is this temporary or permanent?”
Ladouceur’s reference to $24 billion is what the Federal Emergency Management Agency (FEMA) has borrowed to pay flood insurance claims and the impetus to the 2012 Biggert-Waters Act that set in motion the removal of federal flood insurance subsidies. As a result, some homeowners were reporting their premiums would skyrocket, from less than $4,000 to more than $30,000 a year for $250,000 in coverage.
The House amendment to the Biggert-Waters Act, which passed by a vote of 306-91, is similar in some aspects to a bill passed earlier this year by the Senate in that it would ease-in rate increases. The Senate bill delayed the increases for four years. In order for it to become law, the House bill will need to gain Senate approval and be signed by the president.
But is the measure simply delaying the inevitable?
“Flood insurance is so high, even on homes properly built. People can’t sell their homes and values are going to come down. And some people aren’t going to be able to pay their mortgages,” said Leslie Derrig, who lives in Conimicut.
Derrig lobbied Congressman James Langevin to amend the original legislation, as did others affected by the escalating premiums. Ladouceur and Ward 4 Councilman Joseph Solomon, who lives on the water and saw a $3,000 increase in his premium, called on the Congressional delegation and FEMA to come before the City Council to answer questions about the program in August. That never happened, but the Rhode Island Emergency Management Agency held a workshop to address the public at the request of Mayor Scott Avedisian.
“It is a positive development that will assist many homeowners. What we need is a long-term plan that allows homeowners in flood zones an affordable way to insure their largest asset – their homes,” Avedisian said in response to an email yesterday.
With 39 miles of shoreline, more than 1,800 Warwick homeowners have flood insurance. There are an untold number of homeowners that live within a flood zone but chose to self-insure their properties. Property owners within flood zones are required to obtain insurance in order to mortgage or borrow on their property.
Frank Carpenter, who lives on Warwick Cove in Oakland Beach, is one of those who questions what he will do as his premium increases.
“How do you keep up with that kind of money?” he asked. Carpenter is currently paying $2,500 a year, but has been told he can expect the premium to hit $20,000. Carpenter’s house was built in 1930 and survived the hurricane of 1938 that swept hundreds of homes into the bay. Carpenter thinks elevating his home may offer a solution and in the long run be cheaper than paying insurance premiums year after year.
There was a celebratory air to passage of the House bill with both Langevin and Representative David Cicilline issuing statements.
Langevin said, “I am very pleased that we were able to reach a bipartisan compromise to alleviate some of the financial concerns of coastal property owners, particularly the many homeowners in my district who faced significant increases in flood insurance costs. This legislation will refund the excess premium charges that property owners have already paid, and will reinstate the ‘grandfathering’ process that protects property owners from substantial cost increases due to flood zone re-mapping.”
In addition, Langevin said, the bill removes rate increase “triggers” so the sale of a home won’t initiate higher premiums, and it makes costs more predictable by lowering the Federal Emergency Management Agency’s annual increase authority to an average of 15 percent, not to exceed 18 percent.
“While more research on the sustainability of the federal flood insurance program is needed, I am encouraged by the steps this bill takes to educate and protect policyholders. As a result of this bill, FEMA will complete an affordability study, allowing Congress to continue to discuss the actuarial soundness of flood insurance, but not at the expense of policyholders,” Langevin said.
According to Langevin’s office, some of the revenue loss caused by the bill will be offset by annual surcharges that will be imposed on all policies: $25 a year for primary residences and $250 a year for second homes, businesses and other non-residential properties. The Congressional Budget Office estimates that the changes proposed by H.R. 3370 would have no significant effect on net income to the National Flood Insurance Program (NFIP) over the 2015-2024 period.
“This fix to the National Flood Insurance Program will protect Rhode Island homeowners from sharp, overnight increases in flood insurance premiums,” Cicilline said in a statement. “This bill helps middle class families, it is completely paid for and it preserves reforms in the long-term that were implemented to ensure the National Flood Insurance Program remains sustainable.”
According to the Congressmen, more than 5.5 million people currently hold flood insurance policies in more than 21,800 communities across the nation. The Rhode Island Emergency Management Agency (RIEMA) estimates there are currently more than 16,000 NFIP issued policies in Rhode Island.
In a statement, Senator Jack Reed said, "FEMA must strive to keep flood insurance affordable and accessible. This bipartisan agreement will help save property owners from massive rate increases. I am pleased that the House accepted several key changes, including my community-based flood insurance amendment, and I am hopeful the Senate will clear this bill in the coming days so it can quickly be signed into law."
“For now, people at least have some relief,” said Ladouceur.
“People are in desperate situations,” he added, “hopefully there is a permanent solution.”
He sees the measure as putting people in a “holding pattern.” He can understand why people would put off making improvements to their homes, even doing ongoing maintenance if they believe they will eventually be faced with insurance premiums they can’t pay.
“They’re going to ask, ‘Why put money in it?’”
Yet, he added, “We’re definitely better than where we were.”
“This is good news,” said Solomon. “Now we need a long-term plan to address this in an equitable way for the future. It needs to be dealt in a way that doesn’t force people from their homes.”
According to Reed’s office, the House bill includes a provision authored by Reed in the Senate bill requiring FEMA to study the possibility of making voluntary, community-based flood insurance policies available through the National Flood Insurance Program. This kind of voluntary, community-based flood insurance plan could potentially give communities the option to purchase blanket policies for all properties in their communities or a portion of their communities. This could help localities to offer more affordable insurance policies to all their residents and provide greater incentives for community-wide mitigation activities to help reduce risk and insurance costs.