When Congress creates a problem, it should clean up its mess. But Congress' inability to respond to punishing new flood insurance rates in several states makes it necessary for Florida to look out for itself. Florida, long a cash cow for the National Flood Insurance Program, should be exploring options such as starting its own flood insurance pool and rebuilding a private market here. A national fund remains preferable, but not at the expense of Florida's economy.
Gov. Rick Scott, Attorney General Pam Bondi and Chief Financial Officer Jeff Atwater announced the state would file a brief in support of a lawsuit filed last month by Mississippi's insurance commissioner. The suit is a long-shot argument that the Federal Emergency Management Agency improperly implemented the Biggert-Waters Insurance Reform Act of 2012 because it didn't finish an affordability study before setting new rates that are sending shock waves through real estate markets. Florida leaders should get more creative.
Biggert-Waters had admirable goals in the wake of enormous claims after Hurricanes Katrina and Sandy that forced $24 billion in federal loans to the flood insurance program. Congress aimed to put the program on the path to solvency by eliminating premium subsidies starting Oct. 1 for homes built before federal flood maps were created, and next year for homes that were grandfathered into lower rates when flood maps were revised. The unexpected result was exponentially higher premiums. The increases will be phased in over five years for homeowners and upon sale for new property owners. That has put a vice grip on all but cash-only sales in older, low-lying neighborhoods in Florida. And Washington has yet to adequately explain the assumptions behind the new rates.
Wisely, some Florida leaders are signaling they are not waiting for a Washington solution that may never come. While Congress is considering bills to delay Biggert-Waters, it's far from clear there is an appetite for a broader fix needed to achieve more affordable flood insurance.
Florida Insurance Commissioner Kevin McCarty told state lawmakers last week that he is exploring how the state might create a private insurance market roughly 40 years after the National Flood Insurance Program's creation. But insurance experts told the Senate Banking and Insurance Committee last week that they would need maximum flexibility in setting rates to do it.
That's why lawmakers shouldn't stop with just considering a private solution if it's going to mean lax regulation. Senate Banking and Insurance Committee Chairman David Simmons, R-Altamonte Springs, among others, wants to explore establishing a state-run flood insurance pool where all excess premiums could be dedicated to reserves, not private company profits. That could work. Over the life of the national program, Floridians have paid $4 in premiums for every $1 in claims filed.
Moving toward solutions independent of Congress would benefit Floridians. It will either push Washington to finally act to fix its mistake and keep Florida premiums for the national program, or there will be a homegrown solution. Either is far preferable to the status quo.