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Two New Developments Hold Promise for Private Flood Insurance Market

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FEMA remapping creates uncertainly

Recent news that federal financial regulators have adopted a final rule compelling lenders to accept private flood insurance, together with a renewed effort to adopt a model flood insurance law for all states to encourage a private market, bodes well for consumers and the growing private insurance sector.  Not only will these developments create more available and affordable flood insurance options, but they will also shift more risk onto the private market and away from the federal government’s debt-burdened, taxpayer-subsidized National Flood Insurance Program (NFIP).

I was honored to be asked recently to write an article that appears in this month’s Risk Management and Insurance Review.  You can read the full article here.  With ever increasing NFIP rates, it’s only natural that a private market should relieve some of NFIP’s lower-risk portfolio.  With the NFIP in debt to the tune of nearly $21 billion, shifting risk appropriately to the private market is both smart public policy and increases the availability and affordability of flood insurance for consumers.

But there was a recent warning sounded about the new federal rule that requires mortgage lenders to accept both private and NFIP flood insurance policies.  Craig Poulton, CEO of Poulton Associates, a private flood insurer, expressed concern in a recent Insurance Business article that regulated lending institutions will have to “exercise their discretion to accept certain policies issued by private insurers that do not contain all of the criteria in the statutory definition of ‘private flood insurance,’” according to the final rule.  “What they’ve done is they have continued the existing paradigm where under a bank examiner comes a de facto insurance regulator,” Poulton said in the article.

Poulton is right and his concern is legitimate.  That’s why we need regulated forms, but unregulated rates, to encourage the development of private insurance markets in states across the country, just as we have done here in Florida.

This graphic describes the various National Flood Insurance Program flood zones arranged from closest to the water to inland — VE, AE Coastal, AE and X. Source: FEMA

Meanwhile, in communities across the Sunshine State, FEMA is continuing to debut its latest Flood Insurance Rate Maps (FIRMs).  In the Florida Keys, there is concern that the new maps will have base flood elevations significantly higher than current maps, up to two feet in some areas.  That could bring higher insurance rates for properties unable or unwilling to meet the new criteria post-Irma.  That, in turn, could affect already high real estate prices in the Keys, already under a state mandated end to development by 2023, as reported in this Keys Weekly article.

LMA Newsletter of 3-11-19

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Tags: FEMA, Flood Mapping, Florida Keys, NFIP, Private flood insurance, Risk Management and Insurance Review

“Lisa this is another great newsletter, and we appreciate the time and energy you put into these informative updates – you are on top of these topics!”

Mike Graham, CEO
Smart Vent Products, Floodproofing.com, & Risk Reduction Plus
Juno Beach, FL

“I have followed your weekly newsletter and podcasts and now have a full appreciation for what you bring to this industry.  You are an inspiring force, plain and simple.  I wanted you to know that you make a difference.  Thank you for all you do!”

Jeffrey Karam, CPCU
Bradenton, FL

“Great article on Risk Rating 2.0!”

Austin Perez, Senior Policy Representative for Federal Housing, Valuation, Insurance and Commercial Issues
National Association of Realtors
Washington, D.C.

“Just a quick note to let you know how much I have appreciated your newsletter over the years and the assistance they offer for those in the field of claims. We depend on the information more than you will ever know!”

Laurie Rasberry, Chief Claims Officer
Acorn Claims
Prosper, Texas

“Your newsletter is fabulous!  I greatly appreciate the topics you expose, so that insurance professionals like myself can keep up with the latest events that affect the public we serve and ourselves.”

Cynthia Hoehn, Independent Property & Casualty Personal Lines insurance agent
Clermont, FL

“Thank you Lisa for staying on top of, as well as advocating, for Florida residents and legislative reform. Your newsletters are very informative and enjoy reading the points of view.”  

Shawna Miller, Sr. Claims Quality Assurance & Compliance Manager
Florida Peninsula Insurance Company
Jacksonville, FL

“Just wanted to say that I thoroughly love your newsletter. It’s is always informative and insightful to the ins and outs of our industry.  You are an inspiration and an important asset in the insurance world.  Keep up the great work!” 

Cynthia Scott, President
University Insurance Group
Davie, FL

“Another great Newsletter on Florida industry this week.  Your service and advocacy in Florida is very important to keeping me updated and apprised of the Florida insurance laws, trends and overall environment.  Something similar is very much needed in Louisiana, too.”

Jennifer Tedesco, Esq., Claims Director
Pharos Claims Services
Orlando, FL

“Lisa Miller is a true champion for the insurance industry, with her regular updates! We appreciate all you do and keeping us up to date on priority issues!”

Gillian Lloyd, Account Executive
Zywave
Milwaukee, WI

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