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Florida private flood insurance options expand


Published:   |   Updated: April 10, 2014 at 11:49 AM

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The availability of private flood insurance in Florida has grown again this week even after the passage of a law to bring down rates for many homeowners.

Ormond Beach-based Security First Managers announced Tuesday it will offer primary flood coverage up to $500,000, twice the policy limit in the National Flood Insurance Program.

Pricier excess coverage for luxury homes also is available up to $5 million.

The new offering comes from a partnership with Ironshore, a New York insurer that already provides excess coverage in Florida using Security First as its agent.

Rates will be competitive with the federal program, company officials said.

The move appears to demonstrate a long-term interest from private companies in jumping into the flood insurance market.

A small number of Florida companies have entered the market specifically targeting homeowners who experienced exorbitant premium hikes as part of federal reforms that went into effect last year.

Companies such as Security First are looking beyond the estimated 2 million Florida homes in flood plains that are required to carry flood insurance as a condition of their mortgages.

Security First President Locke Burke says there are an additional 5 million in the state that don’t have flood coverage, representing a big opportunity for the private market to sell at rates below the national program.

“The real question is: What would it take to get some of those 5 million people who don’t buy coverage to buy?” he said.

In the past, private insurance has mostly been limited to high-value policies in excess of the federal program’s $250,000 limit for structure and $100,000 for contents.

In addition to doubling those limits, the Security First policy combines flood and wind hazards, meaning customers don’t have to file separate claims after a major storm event.

The policy may be attractive, especially to owners of older second homes who will get no relief under the law passed by Congress last month.

Many owners of vacation homes also don’t realize their government policy won’t fully cover replacement costs for their homes unless they are primary residences, meaning they stay there 80 percent of the year, Burke said.

The passage of the bipartisan Homeowner Flood Insurance Affordability Act will certainly draw some people back into the federal program as lower, subsidized rates are restored for many primary homes in the next year.

Ultimately, though, the escalation of premiums called for in the Biggert-Waters Act will continue, albeit more slowly.

The emergence of primary flood insurance from companies such as The Flood Insurance Agency in Gainesville, Homeowner’s Choice in Tampa and now Security First demonstrates the Federal Emergency Management Agency may be off in its risk assessments and pricing, Burke said.

“It proves there are other people in the private sector who believe at least some of the policies in there are overpriced,” he said.

The Flood Insurance Agency, which sells policies backed by Lloyd’s of London, continues to expand, offering primary flood coverage for homes up to $500,000 in 18 states, and it recently began insuring commercial property.

Further private expansion may occur once rules are laid out for companies in Florida to enter what’s known as the admitted insurance market.

Though the companies that have already entered the market are required to be well-capitalized, most of the offerings are surplus lines policies, a type of coverage not financially guaranteed by the state.

A bill championed by Florida State Sen. Jeff Brandes, R-St. Petersburg, would create groundwork for private companies to sell flood coverage in the admitted market.

If that happens, insurers still may have to resolve questions about the federal law.

The current law requires the government’s five major financial regulators to draft rules for how much capital a private insurer must carry to provide alternative coverage to the federal program.

There is continued discussion in Washington about whether solvency requirements would be left up to individual states to decide or whether they would be set by the federal government, Burke said.

“Nobody is going to want to invest a lot of time and effort in that until they know what the rules are,” he said.

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