Floridians hit by Ian will pay more for flood insurance. What can Tampa Bay learn?
A dispute between FEMA and Lee County has resulted in thousands bracing for a spike in their premiums. The Federal Emergency Management Association (FEMA) has revoked a 25% discount on flood insurance in Lee County, Florida, causing more than 100,000 local homeowners to face significant increases in their rates. The National Flood Insurance Program, which covers roughly 90% of Floridians with flood insurance as of 2021, requires certain rules about rebuilding to mitigate risks. If local governments go beyond what federal law requires, their residents receive discounts off their flood insurance. However, FEMA has revoked these discounts due to officials failing to comply with its terms. The decision to downgrade these communities' scores in the discount program, called the Community Rating System, could result in higher premiums or even suspension of their insurance policies. Experts suggest that the complex flood insurance system should be learned from this case.
Published : 4 weeks ago by Jack Evans, Emily L. Mahoney in Environment
Less than two years ago, Hurricane Ian destroyed more than 5,000 structures in Lee County in Southwest Florida and caused major damage to 14,000 others. Now, from rebuilding efforts, more bad news has emerged: A federal agency says local officials weren’t following its rules, so more than 100,000 local homeowners will face spikes in flood insurance rates later this year.
Intense finger-pointing has already begun between the county and the Federal Emergency Management Association. But beneath the noise, experts say there are important lessons for Tampa Bay and the rest of Florida about the complex flood insurance system that’s supposed to serve as a lifeline for homeowners in an increasingly risky state.
That’s because at the heart of the Lee County dispute is FEMA’s National Flood Insurance Program, which covered roughly 90% of Floridians with flood insurance as of 2021. To participate, cities and counties must follow certain rules about rebuilding to mitigate risks. If the local governments go beyond what federal law requires — like having outreach programs and stricter building regulations — their residents get discounts off their flood insurance.
In Lee County, FEMA said officials failed to document or enforce federal requirements and revoked the discount. And that should be a wake-up call for other communities, said Lisa Foster, Pinellas County’s floodplain administrator.
“Everybody should really follow this case closely,” said Chad Berginnis, the executive director of the Association of State Floodplain Managers.
The changes in Lee County affect residents in the unincorporated county and four of its six cities and villages: Bonita Springs, Cape Coral, Estero and Fort Myers Beach. As of last fall, people with federal flood insurance in most of those places got a 25% discount (in Estero, it was 20%).
Last week, FEMA announced that it would downgrade those communities’ scores in the discount program, called the Community Rating System, because of their failure to comply with its terms. One of the agency’s central complaints involves a rule that requires structures with substantial damage — meaning it would cost half or more of the building’s value to repair — to be rebuilt to modern standards.
“If you talk to any local floodplain manager, the most difficult job they have to do is after a disaster go out and red-tag buildings and determine if they’re substantially damaged and make sure that if people rebuild, they do it in compliance with the local code,” Berginnis said. “It is absolutely necessary to break the cycle of damage, repair, damage again.”
The substantial damage rule isn’t one of the above-and-beyond steps a county or city takes to get residents a discount; it’s a foundational part of participating in the National Flood Insurance Program. Taking away the discounts is the first sanction FEMA can apply, Berginnis said. If the local governments don’t get into compliance, it can put them on probation — leading to higher premiums — or suspend them altogether, which would leave many without insurance.
Jake Holehouse, president of St. Petersburg-based HH Insurance Group, said he sympathizes with Lee County and has seen, anecdotally, that the county was following the rules at least in some cases.
That’s because people have called his office asking for insurance quotes for “skeleton structures” they’re considering buying in Lee County after their original owners had to sell because the damage exceeded 50% and they couldn’t afford to bring them up to the new standards.
“I’m not privy to what happened in the (FEMA) audit, but I think it probably did come as a shock to them,” he said.
What can the rest of Florida learn?
Holehouse said the 50% rule is “really hard to enforce,” because the 50% is calculated based on how much it would cost to rebuild a damaged home based on the property’s depreciated value. With the recent inflation of building materials and other moving targets, it becomes a “grey zone” of enforcement.
Not to mention the fact that “many people, contractors and homeowners, know how to play the game where you underestimate your damage and then do additional work beyond it,” he added.
“Any municipality after a hurricane could have a similar experience,” he said.
Foster emphasized that the National Flood Insurance Program is, at its core, an agreement: Local governments enforce regulations to protect people from floods, and in turn, the federal government provides insurance to people living in flood-prone places.
Maintaining that deal requires a lot of work, Foster said. Pinellas assesses damage after every storm, maintains its drainage systems, organizes public events and documents everything for the mountain of paperwork it gives FEMA every few years. As of last fall, residents in unincorporated Pinellas were getting a 35% discount on their flood policies, and Foster said Wednesday that that’s poised to jump to 40%. The county has not had to face devastation on the scale that Hurricane Ian left to the south, but if it ever does, she said she believes the county is set up to make sure that recovery doesn’t run afoul of FEMA’s rules.
“The hope would be that this would not occur here,” she said.
FEMA has “too few resources and too many issues,” Berginnis said, which has caused enforcement to be spotty in the past — and, perhaps, left some communities thinking they can get away with skirting its requirements. But FEMA has signaled in recent years that it will focus more on sanctioning rulebreakers. The emphasis, Berginnis said, largely resulted from the agency’s realization that ever-increasing flood damage tolls will never be stemmed if it doesn’t force the issue on making new construction less vulnerable.
“It is absolutely easy to say we are not getting ahead of our flood damages in the country,” he said. “Damages alone are a driver enough for FEMA to say we’ve got to take a look at our enforcement.”
Lee County and the cities there can re-qualify for the lost discounts by coming back into compliance, and Berginnis noted that FEMA sanctions have worked before. Twenty years ago, it put Monroe County — home to the Florida Keys — on probation. Today, its policyholders get 35% off.