Will Floridians Have An Option To Obtain Affordable Flood Insurance Coverage From Private Insurers?

With all the heavy rains and flooding occurring recently this past week in Southeast Florida, I thought it fitting to discuss flood insurance. A few days ago, the Florida Senate Banking and Insurance Committee passed a bill that looks to provide Floridians with an option of obtaining flood insurance from private insurers. The motivation for the bill seems to be to address hikes in flood insurance premiums expected under the National Flood Insurance Program (“NFIP”).

Senate Bill 542, which would lay the framework for the private marketplace, received unanimous support Wednesday in the Senate Committee on Banking and Insurance.

Senate Bill 542 creates a wide range of flexible options for policyholders to choose so they can reach an affordable level of coverage for their property. The hallmark of the proposal will allow policyholders the option of covering either the outstanding balance of their mortgage, the replacement cost of their property, or the actual cash value of their property.1 The thought is that consumers can have some options to select what they think is best suited for their needs in this flood insurance market.

There is of course no guarantee that private insurers will enter this market if they are even given that chance if the bill becomes law. This is also no guarantee that any private insurers interested in entering the flood insurance market in Florida would offer rates lower than what consumers currently have available through the NFIP. However the action this past week is the first step toward knowing those options and potentially having some other options available.

We will continue to track this bill and will provide updates as it progresses further.
1 "Legislation Is Fast Tracked To Encourage Private Flood Insurance In Florida," Miami Herald, Mary Ellen Klas, January 8, 2014.

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David Thompson - January 13, 2014 11:58 AM

The "roadblock" to the use of private flood insurance many times is going to be the lender if there is one involved. Lenders are bound by the guidelines issued by their federal regulators when it comes to accepting private flood insurance. For example, a lender is most likely not going to accept a policy that covers only the mortgage balance; they typically will require coverage to be equal to 100 percent of the estimated replacement cost of the structure. Additionally, the private policy must be at least as broad as the NFIP policy. Lenders routinely today refuse to accept private flood insurance.

Jim Townsend - January 28, 2014 9:19 AM

Homeowners Choice Insurance is now writing flood riders on existing policies that effectively combine coverage for both wind and flood. That is the good news as it eliminates the predictable dispute of wind/flood causation of loss. The bad news is that Homeowners Choice will not insure VE rated properties, and these are most seriously hurt by the Biggert-Waters Act.

It is helpful to remember that the FEMA flood insurance program was started because private insurance companies did not want to write flood insurance at rates that were affordable. When the discussion today starts by talking about "subsidized rates" the conversation is over.

Federal support for "Terrorism Insurance" in interesting comparison. Maxine Waters, the co-sponsor of the Biggert-Waters Act, consistently talks about "affordable coverage" as she refers to federal coverage for businesses and properties that may be hurt by acts of terrorism.

We do not have an insurance problem, we have a political problem.

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