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Flood insurance changes afoot in Florida and, with luck, the US p3

Mon Oct 5th, 2015 on     Homeowners Insurance,    

Florida has escaped Hurricane Joaquin, but the category 4 storm has contributed to an historic amount of flood damage. As the rain and the flooding continue, South Carolina Gov. Nikki Haley has said her state is living through a 1,000-year flood. It could be weeks before power is returned to some affected areas. And, with so many historic buildings in Charleston, insurance companies are expecting an enormously expensive cleanup.

This is the kind of weather event that flood insurance is meant for, as the coastal areas know. This time around, though, the flooding extends inland by 100 miles or more. As one resident noted, that far inland homeowners aren’t required to have flood insurance. They could be just out of luck.

Those homeowners may opt for flood policies after this. But will they have to buy the National Flood Insurance Program’s coverage?

If Congress passes House Bill 2901, the Flood Insurance Market Parity and Modernization Act of 2015, South Carolina and other states may have a chance to catch up with Florida. The bill will ease some market restrictions in order to allow private insurance companies to write and to sell flood insurance that is not part of NFIP.

Any attempt at reform will probably face mild opposition from insurance commissioners around the country. There is a question, for example, of whether the private policy terms will have to match NFIP policy terms exactly or whether private insurers can insert their own terms. The latter could result in better coverage for homeowners, but banks could be slow to recognize the policies as meeting the insurance requirement. If NFIP is the standard, how far can private insurers stray without causing problems for the policyholders?

HR 2901 would give banks the go-ahead to accept those private insurance policies as long as the policies have been approved by the state’s insurance department. The bill would also change the required coverage limits: The limit would be either the home’s value, the value of the outstanding mortgage balance or the maximum NFIP limit available, whichever is lowest.

With more flexible insurance options, homeowners should be able to save money and to get a better return for their premium dollar — at least, that’s the theory. The question right now is whether the bill will advance before 2016. Once the election season kicks off in earnest, Congress may turn its attention to more high-profile issues. It’s hard to build a flashy campaign ad around expanding the flood insurance market to include private insurers.

Source: AIR Worldwide, “The Changing State of Flood Insurance,” John Elbl, July 27, 2015

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