Florida Panel Takes First Step To Creating Private Flood Market

With thousands of Florida residents facing dramatic increases in their flood insurance premiums, state lawmakers are preparing the groundwork for a private market option to premiums charged by the federal flood insurance program.

The Senate Banking and Insurance Committee approved a bill by Senator Jeff Brandes, R-St. Petersburg, that lays out a new framework to encourage private insurers to write flood insurance.

“The aim of this bill is to jumpstart a private insurance option to the National Flood Insurance Program (NFIP),” said Brandes.

The bill is designed to create state standards for setting flood insurance rates and give insurers greater latitude in providing the coverage.

The bill adds two members to the Florida Commission on Hurricane Loss Projection including an engineer who specializes in floodplain management and a meteorologist who specializes in floods.

The commission is then required to approve all actuarial methods and models for setting rates by July 1, 2015.

The bill also would grant insurers and surplus lines insurers more latitude when it comes to coverage. For example, insurers could offer higher deductibles than those currently authorized by the NFIP.

Consumers would also have the option to purchase full replacement costs or the actual cash value of the property. Insurers could also limit coverage to the main structure of a home.

The Brandes bill comes as Congress continues to debate whether to delay the Biggert-Waters Insurance Reform Act of 2012, which it enacted to close a $24 billion funding shortfall. The law has put the NFIP on a course to eliminate premiums subsidies and bring premiums more in line with costs, which is resulting in sizable premium increases for many insureds.

More than two million Florida residents are covered through the NFIP. The rate increases would be felt most by 280,000 homeowners whose homes were built before 1974. Those homeowners stand to lose long-standing subsidizes that have artificially lowered their premiums.

Both the U.S. Senate and House have bills to delay the Biggert-Water reforms and the premium increases but passage of the bills is uncertain.

Brandes said Florida consumers deserve more than just a federal approach to insuring flood damage.

“Hoping Congress will act is not a strategy we can relay on,” said Brandes. “We need a strong alternative to protect Floridians.”

So far only two entities have come forward with plans to actually write flood private policies. The Gainesville-Florida Flood Insurance Agency is offering policies backed by the surplus lines carrier Lloyds Private Flood.

Homeowners Choice Property and Casualty Insurance Co. has announced its plan to offer its existing 140,000 policyholders an endorsement that would cover flood damage.

But insurer representatives made it known that if Florida lawmakers were to enact Brandes’ bill, more entities likely would come.

Association of Bermuda Insurers and Reinsurers President Bradley Kading was among those offering his voice in support of the bill.

“Reinsurers are ready to provide reinsurance protection to those Florida insurance clients who want the write flood insurance,” said Kading.

Still, some lawmakers voiced their skepticism, saying in effect it is too little, too late.

“It doesn’t guarantee any new companies coming into the market and it doesn’t guarantee it will be at a lower costs,” said Senator Nancy Detert (R-Venice).