Mar 14, 2014 4 min read

A bill to counteract the harsh consequences of flood insurance reform was passed by Congress on March 13 and will be sent to President Barack Obama to be signed into law.

The Biggert-Waters Flood Insurance Reform Act of 2012 was originally meant to fix the struggling National Flood Insurance Program (NFIP) — in $24 billion worth of debt following a series of devastating storms — but what it ended up doing was astronomically raising rates for coastal homeowners.

In Southwest Florida the elimination of the “grandfathering” clause or Section 207 was the biggest concern among residents. This section had been protecting homeowners from seeing their rates nearly quadruple by assuming “full risk,” but would be overturned by Biggert-Waters.

The bill passed by Congress on March 13 preserves “grandfathering” and caps annual premium increases at 18 percent.

Local realtors were also worried about how Biggert-Waters would effect the housing industry, specifically because new buyers would be responsible for paying the “full risk” rate, rather than being slowly phased in. If signed into law, the bill guarantees lower rates would be passed on to new buyers.

According to the Associated Press, home buyers after July 2012 would also receive rebates from rolled back rates.

Gov. Rick Scott, who had been asking Obama to sign an executive order to stop the rate hikes, released a statement on March 13 that the bill was a victory for all Florida families.

“This is a victory for all Florida families who have been impacted by ongoing uncertainty and faced the possibility of paying devastating rate increases. Though we saw little interest from the President on acting quickly to stop impending rate hikes, it appears he will sign this legislation and lift the burden that has been facing our state,” said Scott.

A Lee County delegation — including Sanibel Mayor Kevin Ruane, Lee County Commissioner Larry Kiker, and the mayors of Fort Myers Beach, Cape Coral, and Bonita Springs — visited Washington D.C. in February to advocate for relief.

“Obviously, we are thrilled with the news,” said Sanibel Mayor Kevin Ruane. “It was a combined effort at looking at the various issues that were there and being able to meet with House leaders to understand what resonated.”

The passage of this bill would provide relief for 25 percent of policyholders in Lee County, he said.

“The majority of what we asked for is in the bill,” said Ruane. “This could be a great thing for Lee County and the State of Florida.”

Chris Heidrick, owner of Heidrick & Co. Insurance, also joined the delegation in D.C.

He said the bill, which he expects to be signed into law, removes the most harmful side effects of Biggert-Waters and incorporates many of the ideas proposed by the delegation, but pointed out that rates are still going to increase in the future.

“Flood insurance rates have to go up, particularly for the older, pre-FIRM structures, the ones built before the rate maps were in place,” said Heidrick. “The rates for those structures have never been adequate or actuarially sound.”

The pre-FIRM structures are those built before 1979 and 1984 for Sanibel and Captiva, respectively.

“The bill strikes a balance between increasing premiums to ensure the long term solvency of the NFIP, which of course is critical to the barrier islands, with the affordability and predictability that is necessary to sustain our local economy and real estate markets,” said Heidrick.

Between the next six-to-12 months the Federal Emergency Management Agency (FEMA) will release its guidance on how future rates should be calculated and while it’s good news that Congress passed the reform bill on Thursday, local homeowners won’t know much about rate changes for some time.