Storms stir call to renew flood insurance

Threats from Hurricane Irma and the aftermath of Harvey have driven demand for insurance and efforts to renew the federal flood insurance program that expires this month.

“We've definitely had increased calls for increased coverage from people who now realize they don’t need to be in the flood plain to be flooded,” said James Lumbra, president of LRA Insurance of Maitland. “You put 6 feet of water anywhere, and you’re going to have flooding.”

Most flood policies take effect 30 days after being approved, so it’s too late for floodwater-damage protection related to Irma. Lumbra said he was inundated with calls Tuesday and got emails every halfhour or so from private insurers putting a moratorium on new flood policies in Florida.

The clock is still ticking on keeping the federal flood insurance program alive. Congress is set to vote in about three weeks on the program, which was operating at a $24 billion loss — before Harvey-related flood damage totaled more

than $25 billion. Rates are likely to rise.

Federal flood insurance has been around to protect homeowners and mortgage companies for half a century — and long criticized for failing to support itself. Critics want it to end because it is expensive for the government. Most homeowners in flood-prone areas are forced to carry it. Many privately issued policies offer additional coverage for more expensive homes.

No other state has as much at stake as Florida when it comes to the federal flood insurance program. The state has about a third of the country’s 5 million policies. Most mortgages require coverage in flood zones because regular homeowner policies do not cover flooding. About 12 percent of homeowners in the U.S. had flood insurance in 2016, down from 14 percent two years earlier, according to a 2016 poll by the Insurance Information Institute. Homeowners in the Southeast had the highest rate — 14 percent, it found.

If Congress does not renew the program, existing federal flood policies would continue until renewal time, and the sale of property near lakes, rivers, lowlands and other waterways could largely come to a halt, with no companies willing to lend mortgages on floodprone properties. In 2010, when the federal program last lapsed, about 40,000 home sales were put on hold, according to National Association of Realtors.

Mike Artelli, incoming president of the Space Coast Association of Realtors, said he has three pending home sales in Cocoa Beach that would be canceled without the federal flood insurance program if sales close after the program ends. He said he has been hearing from agents and clients asking why the federal program is about to sunset despite catastrophic floods in Texas and high waters likely for Florida.

“If we got anything similar to Hurricane Harvey, we'd be under water completely with the first storm,” said Artelli.

As Category 5 Irma grew to become the Atlantic’s most powerful storm Wednesday, Florida’s leading real estate industry group pushed a media campaign calling for Congress to renew the flood program.

The Congressional Budget Office recently reported the median annual cost to homeowners for federal flood coverage was $520, with premiums as low as $440 for condos and as high as $770 for vacation homes.

Lumbra said private rates can run as low as $450 for owners outside the flood plain, costing more within the 100-year flood map, when those policies are available.

This year, the General Accounting Office found that premiums were too low to cover costs in the federal program and for private insurance providers to compete against. The oversight group recommended, among other things, limiting availability to lower-income owners and no longer covering oceanfront mansions.

Carolyn Kousky, who oversees policy research for The Wharton School’s Risk Center, said she expects the flood insurance program to continue but possibly on a short-term basis as Congress considers reforms.

“Sweeping reforms have been proposed, including opening doors for increased private underwriting, changing coverage caps, creating a voucher-style program,” she said, adding that there was “no way now” to cover the program’s crippling debt.

Kousky advocated flood insurance even for homeowners who live outside designated flood plains. Harvey is a key example of high waters permeating properties well beyond the 100-year flood plain. The contour maps that delineate the flood plains don't consider stormwater systems that back up in sudden downpours, she added.

Without insurance, homeowners can rebuild with loans from the Small Business Administration or grants from the Federal Emergency Management Agency. But Kousky added that the FEMA dollars can take a long time to get to homeowners, and the average payout in the past has been about $5,000, which usually isn't enough to cover damage.

“Disaster aid is much more limited than you think,” she said. “Affluent people can rebuild, but for most people, they can’t afford to.”