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Friday, Jun 22, 2018
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A private sector response to flood insurance mess

If the federal flood insurance program had been operated as a private company, it likely never would have run up a $24 billion deficit.

So a proposal by two local lawmakers to make it easier for private insurers to offer alternatives to the National Flood Insurance’s staggering rate increases makes sense.

The proposal by state Sen. Jeff Brandes of St. Petersburg and Rep. Larry Ahern of Seminole should provide affordable options for many homeowners.

Yet a private sector strategy is unlikely to encourage, as the old federal insurance policy did, more construction in flood-prone areas. Ironically, the National Flood Insurance reforms were intended to restore market forces to federal policies that were being heavily subsidized by taxpayers.

The program was a budget-buster, running up huge deficits while sparing — at taxpayers’ expense — many wealthy homeowners living in hazardous areas from insurance costs that reflected their actual risks.

As we’ve pointed out before, federal payoffs came with no flood-prevention requirements, and homeowners were covered even if they rebuilt in hazardous areas.

But Congress’ necessary attempt to reform the mess with the Biggert-Waters Act came with typical federal clumsiness. Flood maps included many neighborhoods that were at little risk. Many owners of modest homes faced staggering rate increases, $10,000 or more. It’s estimated about 50,000 homeowners in Hillsborough and Pinellas are affected.

For many of these homeowners the private sector may be able to offer rates that more accurately reflect their risks that the federal program now is inflating. Moreover, as Brandes told the Tribune’s Josh Boatwright, private firms can develop policies that meet homeowners’ specific needs and budgets. Garages and other structures can be excluded from a policy or it can be written to cover only the remainder of a mortgage.

A few companies do offer flood policies, but because the federal program dominated the market, the state doesn’t have a process for quickly reviewing and approving private policies. This legislation would change that, but not attempt to subsidize homeowners or spare them true market costs.

The measure may not eliminate the need for Congress to delay its flood insurance reforms, but it should give many Florida homeowners much-needed immediate relief.

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