Flood insurance rates in flux

Published 8:52 am Thursday, October 8, 2015

Biloxi Insurance agent David Treutel stopped in Picayune last week to address a group of realtors, insurance agents and other professionals who are members of the Greater Picayune Chamber of Commerce about some possible changes to flood insurance law.

Since the Biggert-Waters Insurance Reform Act of 2012 passed, legislators on both sides of the isle have been seeking various changes in the flood insurance legislation, which critics say raise rates to unaffordable levels.

In Mississippi, most flood insurance is subsidized by the federal government and, after hefty payouts after 2006’s hurricane season left the National Flood Insurance Program’s coffers stripped, lawmakers went to work crafting a plan to keep the program afloat and sustainable. According

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to the Government Accountability Office, as of December 2014, the NFIP is in debt by $23 billion due to flood insurance payouts.

The Biggert-Waters Act extended the insurance program for five years but it also mandated that homeowners pay more of the true cost of their flood insurance based on risk. As part of that, owners of multiple homes—vacation homes and rental homes—will have had to pay close to the true cost of flood insurance on secondary residences and business properties.

The law caused a panic among homeowners in the years since, Congress has been seeking some way to keep the program sustainable but also give some relief to homeowners. One of the key provisions in the Homeowner Flood Insurance Affordability Act of 2014, according to news reports, delayed some of those increases for four years and also allows homeowners to sell their homes and be able to pass existing lower rates on to the new owner.

However, Treutel told local insurers and business people there is legislation currently in Congress that could make it easier for private insurers to enter the market.

A spokesperson from the Mississippi Department of Insurance confirmed there is growing interest in private-market insurance.

“Most flood insurance for the average homeowner is underwritten by the NFIP. There is growing interest in the private market, however what is being written now in the private market is either excess (additional coverage in addition to NFIP policies) and commercial policies,” said the spokesperson via email. By department policy, spokespeople are not named.

Treutel said he believes the private market could offer homeowners better options.

“We call for privatization,” he said. However, he added whatever the private market creates needs to “at least be as good as what’s offered through the NFIP.”

He said this is because bankers—the ones who hand out the loans—are hesitant to accept private insurance.

But even if the legislation dies in committee—and as the year rounds down, it is increasingly likely it will—Truetel said better building codes and zealous enforcement can help communities cut down on insurance costs in the communities participate in a community rating system. In such a system, he explained that communities are rated based on their building codes. The tougher the codes and the enforcement, the cheaper the insurance rates.

“You should encourage your elected officials to adopt and enforce strict building codes,” he said. “You’re only as strong as your weakest link.”