Island realtors expect the higher flood insurance premiums to disrupt the recovering Southwest Florida real estate market.
The Sanibel and Captiva Chamber of Commerce hosted an informational panel on changes being made to the National Flood Insurance Program (NFIP) on Nov. 13 at the Sundial Beach Resort and Spa.
Panelists included Bob Rosier, president of Rosier Insurance; Angela Larson Roehl, branch managing agent for Rosier Insurance; Chris Heidrick, president of Heidrick and Company Insurance; and David Schuldenfrei, president of the Sanibel and Captiva Island Association of Realtors.
The panel's focus was to discuss and answer questions on changes to the way flood insurance policies are written due to the passing of the Biggert-Waters Flood Insurance Reform Act of 2012.
Although touted as making NFIP more financially stable, Biggert-Waters also cuts subsidized rates paid by 20 percent of all NFIP policies and increases those premiums by 25 percent annually until the policy holder is paying full risk rates. The 2012 law also eliminated grandfathering coverage under previous flood maps, meaning many property owners will be impacted in future revisions.
"The problem of this is that if FEMA (Federal Emergency Management Agency) comes back out and remaps an area, now the new firm is coming at a higher elevation," said Rosier. "You were originally built to one elevation and now you find yourself one or two feet below."
Two federal bills, named the Homeowner Flood Insurance Affordability Act of 2013, have been introduced to delay and revise the law, H.B. 3370 introduced by Congressman Michael Grimm, R-New York, and S.B. 1610 introduced by Senator Robert Menendez, D-New Jersey, but neither are a repeal.
Originally, Biggert-Waters was supposed to undergo an affordability study before it was signed into law, but Congress never authorized the funds for that study. Instead, some lawmakers are using that oversight as the basis for passing the Affordability Act.
"The Florida and National Association of Realtors began lobbying Congress to fix what they just passed," said Schuldenfrei. "The problem is that once a law is a law, it is very hard to get a change."
Local realtors are confident that both bills will be passed, but the changes to flood insurance are still on the horizon.
"Even if the new act should pass, come January, a lot of this is still coming, even if it's four or five years from now," said Schuldenfrei.
The Florida real estate market has been bouncing back since the 2008 crash, but realtors warn that Biggert-Waters will make it harder to sell homes because new buyers will have to pay the full risk rate, rather than be gradually phased in.
"If you are a primary homeowner you have nothing to worry about for awhile, but when you want to sell that property is when it's going to hurt, the buyer will get the new rate and it could be a gigantic increase," said Schuldenfrei.
The federal government decided to change the structure of the NFIP after Hurricane Katrina, which put FEMA in $17 billion worth of debt and with no way to pay it back. Heidrick explained that NFIP has 5.5 million policies across the United States, 40 percent of which are in Florida, and the policies generate only $3.5 billion every year in premiums.
Heidrick recommended that islanders order a new elevation certificate to determine if their premiums will change, and that could depend on whether they purchased their insurance before July 6, 2012 and the results of the elevation certificate.
Islanders should also get a hold of their flood insurance agents for specific answers.
The Lee County Department of Community Development created a new section on their website to provide Lee County residents with information about the Biggert-Waters Act, at lee-county.com/dcd. The county is also working to delay the implementation of the increases until an affordability study can be done.
"Based upon the recent success we experienced with our designated leaders in Washington, D.C., I am convinced that all the effort we can do here locally can become a catalyst to fix this problem. Everyone is working hard on it and we have the right people looking at the situation," said Lee County Commissioner Larry Kiker, in a prepared statement.