Just as flooded-out residents of New York and New Jersey come to grips with the costs of repairing their homes, flood insurance rates and building standards are set to go up as the result of the federal government getting out of the flood insurance business in the face of advancing climate change.
Changes to the National Flood Insurance Program enacted in July will require homeowners in storm-damaged coastal areas -- about 60% of whom don't have flood insurance -- to get coverage or face premium increases of as much as 25% a year as of January 1. Those increases will drive up their annual insurance bills by hundreds to thousands of dollars.
The legislation, backed by both fiscal conservatives and environmentalists, was passed to strengthen the National Flood Insurance Program, $18 billion in the red after Hurricane Katrina and down to its last $3 billion when Hurricane Sandy, which could generate up to $12 billion in new claims.
Subsidizing development in places where it never should have happened was a mistake, environmentalists say.
The government became a default flood insurance provider because private insurers wouldn't. Federally-underwritten flood insurance, advocated by real estate developers, has, until now, offered artificially low rates. But premiums will double within the next four years.
After January 1, there will be an across-the-board rate increase of 20%, and rate caps, discounts and grandfathering will end.
And with new flood maps not due to be released for months, homeowners considering rebuilding will be flying blind.
The article from the New York Times.