Senate moving to ease flood rate pain

TALLAHASSEE – With one senator calling it Florida’s “most talked-about problem,” state lawmakers on Wednesday moved to entice private companies into a flood insurance market that has been dominated by a federal program.

The Senate Banking and Insurance Committee unanimously backed a bill (SB 542) that would encourage more private insurers to offer an alternative to the National Flood Insurance Program by giving the companies more freedom to set rates and shape coverage plans.

“Ultimately this bill puts consumers in control,” said Sen. Jeff Brandes, R-St. Petersburg, the bill’s sponsor.

Brandes filed the legislation in response to escalating premiums in the federal program, which provides coverage for 2 million Floridians. Some 269,000 of those policies that receive subsidized rates could face substantial increases under a new federal law aimed at shoring up the NFIP.

Efforts to block the NFIP rate escalation have so far been stymied in Congress, but glimmers of hope emerged in Washington on Wednesday.

In the Senate, Democrats are pushing for a vote on a bill as early as next week that would delay the increases for many homeowners for up to four years.

But that bill’s prospects in the House are uncertain. Both chambers must agree for the delay to be instituted. In the U.S. House, a bill to delay the rate increases for 15 months appeared to have more momentum, though it is uncertain when, or even if, that legislation would be scheduled for a vote.

Brandes said regardless of what happens in Washington, Florida lawmakers need to proceed with a private-sector plan.

“Hoping Congress will act is not a strategy we can rely on,” Brandes said. “We need a strong alternative.”

Brandes said his bill would allow private insurers to provide “more choices” for flood coverage, including allowing homeowners to decide whether to opt for coverage for the full replacement cost of their homes or the mortgage amount or its actual cash value. It would also allow homeowners to limit coverage to the main house structure or opt not to cover personal property.

Insurance companies would have more freedom to set rates, although they could use the standard rate review process. One option would include a “consent” agreement with the homeowner on the rate amount.

Brandes said the rates set by the NFIP would act as a “ceiling” for the private insurers’ rates. But he said he believed there was an opportunity for companies to offer competitive, actuarially sound rates in cases where homeowners are now facing annual insurance costs of $30,000 or $40,000 in the federal program.

Sen. Nancy Detert, R-Venice, voted for the bill, warning that Florida could face another housing crisis unless it is addressed.

“This is the most talked about problem in the state of Florida today,” Detert said. “We as a state cannot afford to go through another real estate bust when we’re just now coming out of one.”

But Detert also added a note of caution, saying the legislation provides no guarantee that private insurances will jump into the market or the rates they offer will help consumers. She noted that the state has been trying for years to entice more private insurers into the property market to reduce the size of the state-backed Citizens Property Insurance with limited success.

She said one of the biggest problems impacting flood insurance rates are outdated maps used in the federal program.

Brandes said he is looking at an option in which the state could begin developing its own maps, although he noted it would come with a cost.

Sen. Alan Hays, R-Umatilla, voted for the bill but said he wanted a prohibition in the legislation blocking Citizens from offering flood insurance properties. The bill next heads to the Senate General Government Appropriations Subcommittee headed by Hays.

Sen. Garrett Richter, R-Naples, said “the most responsible way to reduce premiums” is to expand the size of the flood insurance market. “I think we’re on the right track,” he said. “This is a good bill.”

A similar bill is expected to be filed in the House by Rep. Larry Ahern, R-Seminole.