CLEARWATER — A Florida Senate bill filed Tuesday seeks to alleviate skyrocketing federal flood insurance premiums by setting up a competing — and hopefully cheaper — state-run market.
The bill, sponsored by Sen. Jeff Brandes, R-St. Petersburg, would invite private insurers to enter the market by creating a new regulatory system just for flood insurance. It would evaluate rates, risks and a company's financial strength.
Over the last 35 years, Florida homeowners paid four times more in National Flood Insurance Program premiums than they collected in claims. Despite that, many of the older homes in low-lying areas now face sharply higher rates under new congressional mandates. In some cases, rates are jumping from a few thousand dollars to $15,000 or more.
"I have to believe the private market could make a profit at those prices,'' Brandes said Tuesday at a news conference.
He and other state legislators jumped into the fray because the Florida congressional delegation has not been able to secure a rate hike delay in Washington.
State Rep. Larry Ahern, R-Seminole, plans to file a companion bill in the House, and other legislators around the state have signaled their support, Brandes said.
"We hope to have this bill to the governor's desk early in the session,'' he said. "It is designed to go into effect immediately,'' he said, unlike most new laws, which take effect in July.
Many mortgages written in Florida require homeowners to carry flood insurance, almost all provided by the national program. A congressional overhaul last year focused on ending subsidies for some older properties that have enjoyed lower rates for decades.
In some cases, rates in flood zone areas will rise about 20 percent annually until they reflect what the federal government deems the proper market risk.
But under certain conditions — such as when a home is sold — the new owner must pay the full market rate immediately, possibly tripling or quadrupling the premium.
"It has killed the real estate market,'' said Treasure Island Realtor Shirley Madden, who attended the news conference.
One Tampa-based insurer, Homeowners Choice Property & Casualty Insurance, has already jumped into the market by taking care of existing customers.
Beginning Jan. 1, Homeowners Choice will start adding flood endorsements to its homeowners policies. The company has about 140,000 policyholders statewide, but is starting out slowly with this new line of business.
"We'll probably do the first 3,000 flood policies and see how it goes. Then do the next 3,000," CEO Paresh Patel said. "It's a very measured approach. We're not going to write everybody."
Patel said 3,000 policies represents about $1 billion in exposure. "Once we get comfortable about the first billion, we can talk about the next billion," he said.
He estimated the maximum rate of coverage for a property with $250,000 in building coverage and $100,000 in content coverage would be just over $3,000 in an "A" flood zone and about $6,800 in a "V" flood zone.
Homeowners Choice won special approval for its product, said Ron Lehmann, spokesman for the R Street Institute, a think tank that monitors the insurance industry.
The Brandes bill would set up a complete regulatory framework for all flood carriers. Among other things, it would add an engineer who specializes in flood plains to a state board that oversees rate setting, as well as a meteorologist with expertise in floods.
Private insurers could not compete with the federal program when it was subsidized, Lehmann said.
"But if the government is offering real actuarial rates,'' he said, "that is something our companies can match.''
The Florida legislation also would add flexibility to the marketplace, Lehmann said. Insurers would not have to offer content coverage, for example, or temporary living expenses if a home was destroyed. Coverage could be pegged to the mortgage amount, not the total replacement cost.
That would be welcome relief for Verla and Richard Waldo, a Seminole couple facing much higher flood rates next fall. The Waldos, who moved into their 864-square-foot, two-bedroom home in 1997, have whittled their mortgage balance from $75,000 to nearly $40,000.
Verla Waldo, 73, said she had a letter from her bank saying it would be satisfied with $41,600 in flood coverage — enough to cover the remaining mortgage — but her insurance agent insisted that the national program now requires full replacement value, or $111,000 in coverage. "They're saying that I can't say how much coverage I want," she said. "I'd like to know when my rights were taken away from me."