What Does Flood Insurance Reform Mean for You?

TAMPA, FL—The Biggert-Waters Act, a flood insurance reform, passed last summer—and it goes into effect on Oct. 1. So what does this act entail, what regions are most affected and how much can owners expect to pay for flood insurance in light of the reforms?

GlobeSt.com caught up with, Darron Kattan, a managing director and a multifamily brokerage specialist, focuses on properties in Central, West Central, and Southwest Florida, with Franklin Street and Matthew Harrell, a managing director of Franklin Street Insurance Services, to get some answers. Be sure to come back this afternoon when the duo will discuss how flood insurance rate increases are expected to affect commercial real estate investment and more.

GlobeSt.com: What is the Biggert-Waters Act?

Kattan and Harrell: Congress approved the Biggert-Waters Act last summer to deal with the rising tide of debt faced by the National Flood Insurance Program which is administered by FEMA.  The Act aims to bring solvency to the NFIP by raising rates to match the “real risk” of living in a flood-prone area and eliminating premium subsidies on commercial and residential structures built in high-risk flood zones prior to 1975. After 1975, the government created a Flood Insurance Rate Map (FIRM) that specifies various levels of flooding risk and calculates rates that are actuarially sound.  

GlobeSt.com: What regions are most affected by this?

Kattan and Harrell: Owners who have property along the coast in states like Louisiana, Florida and other Gulf states will likely pay an average of 25 percent more on renewals and any new policy for a buyer would go to full actuarial cost. Also, properties located near rivers, lakes and other bodies of water will feel an impact.  Hurricane Katrina and Super Storm Sandy were largely responsible for the flood insurance program's $24 billion debt to the Federal Government.

GlobeSt.com: How much can owners expect to pay?

Kattan and Harrell: Just about every commercial property in a high hazard flood zone will see some increase in their premium, but the older properties will be most penalized.   The minimum increase for properties in a high hazard zone will be 15%, however properties in those same zones built prior to 1975 could see exponential increases due to the fact they now need to be rated with an Elevation Certificate.  The most extreme example we've seen so far is a building go from $2,200 in premium to $17,000.  Aside from Biggert-Waters, rates may also go up this year because FEMA is doing some routine re-mapping, which is expected to bring more properties into a high-hazard zone.

Come back this afternoon for part two of this exclusive interview.