Summary of H.R. 3370 “Homeowner Flood Insurance Affordability Act of 2014”
On March 4, 2014 the United States House of Representatives passed bill H.R. 3370 commonly referred to as the “Homeowner Flood Insurance Affordability Act of 2014.” This bill directly relates to the Biggert-Waters act of 2012 and modifies parts of the act. The bill is broken into 26 sections and a couple of them have a major impact on Florida flood insurance and real estate. Please keep in mind that this bill has only passed the House and it still requires a Senate vote and to be signed by the President. A common statement has been that this bill delays the Biggert-Waters Act of 2012, the bill does not delay Biggert-Waters. We have made incredible progress, but we still need to continue encouraging our Senators and President to finalize this bill. According to govtrack.us this bill only has a 74% chance of being enacted, so we do need to continue pushing this bill forward.
Pre –FIRM (pre 1974) construction
The bill phases in the new Biggert-Waters based rates by having premium increases at a 15% per year rate increase for older pre-FIRM properties until they hit their actuarially sound rate or a private market rate becomes a better rate. Our opinion is that this is actually better than a delay. A delay destroys the confidence of the consumer, real estate professional and insurance professional as they are not aware of the future and it is difficult to advise a client when we don’t understand the long-term ramification. However, by phasing in the rate increase it allows time for policyholders to prepare for rate increases and gives the private market time to react to the marketplace. The phase in rate does include a new buyer so it does not just preserve the current homeowner but it gives the current flood rate to a new policy holder as well. In terms of rates, Homeowners Choice Insurance Company has come out with a private market rate that is ultra competitive with FEMA rates for apples to apples coverage. In addition, we will see additional private rates become competitive with more Lloyds of London availability as well as availability from other major insurance marketplaces.
Right now, we are still actively writing with the private market as the bill still has a long way to go. The private market creates immediate relief for a homeowner and if FEMA does make changes, we will go back to FEMA to rewrite the policy. Our opinion is that the private market is here right now and actively allowing us to write new business policies. This allows for homes closings to take place now, and in the worst case scenario a $4,065 flood rate is not the end of the world for most of Pinellas and Hillsborough County.
Jacob W. Holehouse, CPCU
Ronald F. Holehouse Insurance and Risk Management
Main Office – (727) 823-5551
Fax- (727) 894-3339
125 28th Street North
St. Petersburg, FL 33713