Flood insurance rates could spike as federal program drowns in debt

FORT MYERS, Fla. The federal program for paying out flood insurance claims is severely in debt.

And some in the industry believe an increase in rates is inevitable.

The national flood insurance program, which is run by FEMA, is $25 billion dollars in debt, according to industry experts. Numerous claims are expected after torrential rains in Southwest Florida and the devastation from Hurricane Harvey in parts of Texas.

Congress has until Sept. 30 to vote to extend the program.

It’s too early to speculate what the federal government is going to do to dig the program out of debt, said Lynne McChristian, the Florida representative for the Insurance Information institute.

“They are not charging rates nationally that will collect enough money to pay what they have to do, but they have taken steps by buying reinsurance to pay some of the claims they are going to face this year,” she said.

Florida policy holders make up 35 percent of participants in the program, but historically the number of claims paid out for flooding in Florida has not been as high as other parts of the country.

Rates for Floridians are already high because so much of the state is considered high risk for flood, McChristian said.

Federal law requires anyone with a loan on their property in high risk areas to carry flood insurance.

But more than a quarter of all claims paid out in Florida are to areas considered low-to-moderate risk.

Private insurance companies are entering the market and offering policies comparable to those backed by the federal program, but not all of them are writing coverage for the highest risk areas.

“There is very low take-up rate for flood insurance,” McChristian said. Why is that? No. 1 reason is people underestimate their risk,”

Click here to see how at risk your home is for flooding.