By now, most Floridians have heard about – or even experienced – the incredible spike in flood insurance premiums that are coming their way due to the Biggert-Waters Flood Insurance Reform Act. In short, the Biggert-Waters act is a new federal law which attempts to address a $24 billion dollar deficit in the coffers of the National Flood Insurance Program by raising flood insurance rates across the board.
Unfortunately, the slipshod manner by which this law was enacted is going to have a catastrophic affect on the economy of Florida and the financial future of many Floridians. The Tampa Bay Times wrote just the other day about a Seminole couple who was looking down the barrel at a 900 percent increase in their flood insurance premium. Contrary to the initial thoughts of many, Florida is not known for incurring large amounts of flood losses. In fact, many studies have shown that Floridians have only received about $1 in claim payouts for every $4 that Floridians have paid into the federal flood insurance program. Despite not having a large amount of historical claims, Florida does stand out as having the most overall flood policies issued – over 2 million policies and counting. Because of the sheer number of these policies, Florida must bear the brunt of the steep rise in premiums.
But – even if the Feds have thrown Florida under the bus, help may be on the way from our Florida legislature. State Senator Jeff Brandes of St. Petersburg has said that he is close to filing a bill that would encourage private insurance companies to offer flood insurance in Florida. Normally, flood insurance is not provided under your normal homeowner’s insurance policy and must be purchased separately through the federal flood insurance program. This new proposed legislation would encourage private insurance companies to offer an alternative to the federal flood coverage by making changes in the residential “surplus lines” insurance market. In general, surplus lines insurance carriers are not as regulated as “normal” insurance carriers and are not subject to many of Florida’s laws and requirements (including rate regulation). Lloyds of London, for instance, is a surplus lines carrier, as opposed to State Farm Florida Insurance Company, which is a “non-surplus lines” insurance company and therefore subject to the laws and regulations of Florida.
It has become clear that any relief for Florida property owners will have to come from reforms at the State level as opposed to waiting for the Federal government to take action. Considering the large available market for the issuance of private flood insurance policies and the relatively low occurrence of flood claims, Florida may well turn out to be quite a profitable endeavor for a private insurance carrier willing to take on the risk.