March 21, 2014

President Obama signed legislation today providing relief from huge spikes in insurance premium costs for homeowners living in flood-prone areas.

Lawmakers from BOTH parties supported the measure in response to angry homeowners who are facing sharp premium hikes after the recent overhaul of the federal government’s flood insurance program. Already devastated by Superstorm Sandy, victims on the east coast have been pounded by subsequent “storms” of slow-paying insurance claims, the unnavigable quagmire of unresolved issues related to insurance and flood grant funding, and other bureaucratic procedures in the one and a half years since Sandy.

Fortunately FEMA listened to victims’ concerns when they provided two previous extensions to the deadlines for filing insurance claims, known as “proofs of loss”. Sixty days after Superstorm Sandy with the original deadline upon them, FEMA provided a 6 month extension for victims to organize and file their respective claims. One year ago, FEMA recognized the true extent of damages and home and property owners’ need for more time to contain their losses, procure contractor estimates and repair costs, and simply to overcome the trauma they experienced with the truly devastating and far-reaching effects of this Superstorm.

The last recorded Superstorm was the 1993 Superstorm, aka the Great Blizzard of 1993/The Storm of The Century. A large cyclonic storm that formed over the Gulf of Mexico March 12, 1993, it dissipated in the North Atlantic Ocean on March 15. Superstorms are unique for their intensity, massive size and wide-reaching effects. At its height, the ’93 storm stretched from Canada to Central America, but its main impact was on the Eastern United States moving through the Gulf of Mexico, up through the Eastern U.S. before reaching Canada. Areas as far south as central Alabama and Georgia received 8 inches of snow, the Florida Panhandle reported up to 4 inches with hurricane force wind gusts and record low pressures. Record cold temps were seen across portions of the South and East in the wake of this storm. Pennsylvania received a record 42 inches of snow! Stateside, the storm was responsible for the loss of electric to over 10 million customers. It was reported to have been directly experienced by nearly 40 % of the country’s population at that time. A total of 318 people perished during this storm.

Hurricane Sandy (Courtesy of NOAA)

In comparison, Superstorm Sandy sustained 286 fatalities and was the second costliest hurricane in U.S. history.

In Seibert & Smith, we are still helping property owners in their rebuilding process, much of which includes extending empathy and understanding to peoples’ post-traumatic conditions. Unlike life experiences we often incur, the double-whammy of losing a home/displacement due to circumstances beyond anyone’s control plus the extreme financial duress of a sizeable expense such as real property takes a tremendous toll on people.

New Jersey Sen. Robert Menendez was quoted last week that he was hearing from constituents still reeling from Superstorm Sandy, “many who come to me in tears, expressing horror stories of skyrocketing flood insurance premiums that threaten to force them from their homes.”

The 2012 revisions intended to wean those in flood-prone areas off subsidized rates while requiring extensive updating of the old flood maps NFIP used as guidelines to set premiums. However, the revisions’ implementation left homeowners along the Atlantic and Gulf coasts recently ravaged by hurricanes and still experiencing rebuilding costs facing often unaffordable rate increases.

The newly enacted law caps flood insurance premium increases and allows below-market insurance rates to be passed on to people buying homes in flood zones with taxpayer-subsidized policies. The greatest relief is to owners of properties that were originally built to code, but were later found to be at greater flood risk. These “grandfathered” homeowners currently benefit from rates subsidized by other policyholders, and this new legislation preserves that status capping premium increases at 18 percent per year. (The 2012 overhaul required premiums to increase to sound rates over five years and required extensive remapping).

This legislation has another provision allowing sellers of older homes built before original flood insurance risk maps were drafted to pass taxpayer-subsidized policies on to new buyers of their homes instead of requiring purchasers to pay regular sound rates immediately, as had been required by the 2012 law which would have further hindered an already struggling nationwide economically impacted real estate industry in areas which were within the FEMA risk map zones.

People whose second home is in a flood zone and those whose properties have flooded repeatedly would continue to see their premiums go up by 25 percent a year until reaching a level consistent with their real risk of flooding.