National Flood Insurance Program

Special to the Civic Association: Tim Pallesen.

Palm Beach homeowners will be forced to pay more for flood insurance next year as FEMA hikes rates to pay for flood damage elsewhere.

To justify higher rates, FEMA claims much of Palm Beach is high-risk for flood damage because dunes and seawalls could wash away in a hurricane.  The Palm Beach Town Council protested the flood insurance changes on Sept. 10 and asked the Palm Beach Civic Association to inform residents.

“This will have costly ramifications for property owners,” Mayor Gail Coniglio warned.

Congress passed the Biggert-Waters Flood Insurance Reform Act last year to put the federal flood insurance program on firmer financial ground. The reforms target property owners who have been paying subsidized premiums, such as Palm Beach residents who have received a 15 percent discount since 1992.

Homeowners also could face increases of up to 20 percent a year after their communities adopt new flood insurance rate maps. The Town Council has objected to FEMA’s proposed flood zone map for Palm Beach.

Impacted first when the federal law takes effect next year will be the owners of winter homes with a primary residence elsewhere. They face increases of 25 percent a year for multiple years until their rates reflect the full rate risk of flooding.

Rate increases will be gradual for owners who remain in their homes. But selling a home becomes difficult because a buyer will be required to pay the full rate for coverage immediately. That could more than triple the price paid by the previous owner.

The federal reforms are a response to Hurricane Katrina, which left $16 billion in flood claims primarily in Louisiana. Katrina pushed the federal flood insurance program $18 million in debt and forced it to borrow money to stay in business.

Florida residential and business property owners have paid $16.1 billion in premiums while collecting just $3.7 billion in claims through the history of the program. Louisiana, by contrast, has paid $4.4 billion in premiums but collected four times that in claims.

Florida property owners pay a third of all premiums into the federal program. But most hurricanes that strike Florida, including Hurricane Andrew in 1992, were more windmakers than floodmakers. Of the nation’s top 10 flood-claim events since 1978, only Hurricane Ivan in 2004 caused heavy damage in Florida.

Now about 270,000 Florida properties face huge insurance rate hikes. That number is three times more than the next state.