Florida's flood insurance market is full of perils

Lawmakers hammer out reauthorization of National Flood Insurance Program

MIAMI BEACH, Fla. – With sea levels rising, insurance companies and government regulators are tracking flooding reports in South Florida and are adjusting to the changes to stay in business.

This could mean the increased reports of property damage could result in higher costs for residents. Miami Beach is ground zero. Seawalls and drainage systems in Tuesday's failure of the pumps in South Beach was a warning. 

Miami Beach areas are among the highest-risk flood zones in Miami-Dade. Tony Gallo, a Miami Beach restaurateur, said he has been struggling with flood insurance rules designating his property, which is below street level, as a basement. 

"That's the issue we are fighting to take that off insurance and hopefully get paid for damages," Gallo said.

Increasing competition in the flood insurance market, which would favor consumers, will depend on what lawmakers will be doing to the Federal Emergency Management Agency's National Flood Insurance Program. But experts believe that more regulation could increase costs dramatically for the 6 million homeowner policies in Florida.

Truly Burton, the executive vice president of the Builders Association of South Florida, is among those who are worried about what the costs could do to the affordability of housing. Burton estimates a new regulation asking builders to increase height will cause about 150,000 families not to be able to afford a home in South Florida. 

"They will see an increase somewhat in their flood insurance, but also at the state level the Florida building code as of Jan. 1 will require any one or two-family dwellings to be elevated an additional 12 inches above current FEMA requirements," Burton said. 

There are insurance companies that are still not willing to offer flood insurance in Florida, where the risk for storm surge is higher. Florida accounts for about 37 percent of NFIP policies. Former Florida Insurance Commissioner Kevin McCarty has complained about Florida residents paying "disproportionately higher rates."

The private market will likely not insure properties in areas dealing with repetitive losses. Its support also depends on the reinsurance market. Experts believe is up to the government to figure out how to deal with properties with repetitive losses in high-risk flood areas. 

Florida's private flood insurance market's growth became a model, after 2014 Florida legislation allowed for the Florida Office of Insurance Regulation to distribute flood certification allowing insurers to offer four types of flood coverage. 

The Florida Commission on Hurricane Loss Projection Methodology was required to revise flood loss projections at least every four years. This was one of the many rules released this year that are meant to attract more private insurance companies. 

Florida Insurance Commissioner David Altmaier said late last year the OIR will continue to focus on helping lower costs for Floridians, according to an interview with the Insurance Journal

"We are continuing to work collaboratively with other state insurance regulators and the NFIP to evaluate available data and identify barriers to the facilitation of a private flood insurance market," Altmaier said. 





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