While Congress was dithering over how to fix the catastrophic rate increases it created by passing the Biggert-Waters Flood Insurance Reform Act of 2012, private insurers tested the Florida flood insurance waters and found them to their liking.
What has surprised homeowners here in Florida is that the rates charged by companies including the tony Lloyd's of London have often beaten the National Flood Insurance Program (NFIP) premiums by thousands of dollars. And, the Tampa Bay Times reports those private flood insurance prices are getting even cheaper.
Rates lower than the old NFIP rates
One Tampa Bay couple who bought their home in 2013 after Biggert-Waters was enacted told the Times they would have seen their home's subsidized flood rate of $1,406 pop to nearly $9,000 upon renewal this month.
Instead, they called Lloyd's, which quoted them $1,383, undercutting even the old, subsidized rate that the NFIP intended to revoke.
In the unlikely event you're unfamiliar with Lloyd's, this venerable company, founded in 1688, grew from insuring sea vessels to taking on the risks that made other insurers blanch, including space exploration, political stability, cyberspace and Bruce Springsteen's voice.
Federal flood rates are still in play
In March, Congress finally figured out what to do about the steep federal flood insurance rate increases that were part of Biggert-Waters. A flood fix passed by lawmakers restored the lower, subsidized rates on so-called "grandfathered" older properties and dismantled the more egregious price hikes that had threatened to disrupt coastal housing markets and price middle-class families out of their homes.
However, the NFIP's resolve to bring flood rates up to actuarially-sound levels in order to reduce the $24 billion deficit primarily caused by Hurricane Katrina and Superstorm Sandy losses remains in force, albeit at a slower pace.
That leaves an opening for Lloyd's and other indemnity companies that like the odds of underwriting flood insurance.
Newcomers are unregulated
Several other private insurers also are wading in cautiously. Like Lloyd's, they don't offer flood coverage to condos, mobile homes, properties with roof damage or repeat flood claimants.
But the new low bidders in town come with one important caveat: As what are known as "surplus lines" insurers, they're not subject to state regulation in Florida and elsewhere, meaning they could raise those attractive teaser rates at will.
That said, St. Petersburg flood insurance agent Jake Holehouse predicts that a consumer rush to cheaper private flood insurance rates may soon relegate the NFIP to the status of insurer of last -- rather than only -- resort.
"I think this is the future of the flood insurance market," he told the Tampa Bay Times.
Here's a look back at that less-than-ideal Biggert-Waters flood fix.
What do you think? Will private insurers find solid footing in flood coverage?
Follow me on Twitter: @omnisaurus.
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