AUGUSTA — In part because Maine has one of the oldest housing stocks in the nation, the cost of flood insurance is rising.
Subsidies that kept policies at affordable levels over the past 40-plus years are gone, and the adoption of new federal flood insurance rate maps could mean more bad news for coastal and riverine dwellers.
“Astronomical,” is how Sue Baker described the potential rate hikes for some in flood-prone areas nationwide. Baker is the state coordinator for the Maine Floodplain Management Program.
In 1968, Congress created the National Flood Insurance Program for property owners in flood-risk zones. But property damage from severe weather events put the program $20 billion in debt.
In 2012, Congress passed the Biggert-Waters Flood Insurance Reform Act, requiring the program to eliminate subsidies and raise rates to reflect the true cost of flood risk and make the program solvent. According to the Federal Emergency Management Agency (FEMA), which runs the program, changes will mean premium increases for some, but not all, policyholders.
For the “some,” reforms could mean a 10-fold increase. FEMA says the average annual premium currently is $650.
MAINE INSURED
Maine has about 9,300 flood insurance policies in effect. The most recent calculation by the Maine Floodplain Management Program shows about 33,000 structures are at risk of flooding.
Owners of old buildings are immediately affected by the changes in the insurance program, which some may see as unfair.
“It’s like penalizing someone for building in a certain way when there weren’t any standards,” said Baker.
The determination of a flood hazard area is driven by FEMA’s mapping process, known as Flood Insurance Rate Map, or FIRM. Up to now, buildings constructed before the mapping enrolled in the program received insurance at subsidized rates. This contrasts with newer, post-FIRM buildings, with premiums based on elevation standards.
If the building predated the mapping, owners paid a lower rate, regardless of whether the lowest floor was above or below the predicted flood level.
“Post-FIRM buildings are rated based on where lowest floor is,” Baker said. “The oldest buildings are the ones using up a lot of the program’s funds.”
Nationwide, said Baker, the new regulations will affect about 20 percent of policyholders.
But in Maine, that figure is closer to 40 percent.
“The bottom-line reason is we’ve got the oldest housing stock in the nation, here in New England,” Baker said.
Folks hit hardest are those buying pre-FIRM buildings, said Baker.
This is particularly so, she said, because there is no mandatory obligation by sellers to inform a potential buyer a property is located in a flood zone, “so unless a property owner has done their homework, they often don’t find out it’s in a mapped floodplain until they are notified by their lender within days of the closing date,” Baker said. “The lender must have a flood hazard determination in each loan portfolio and must require flood insurance as a condition of the loan for any building in a mapped flood hazard.”
Baker said she heard from one caller who was quoted a $25,000 annual premium.
SUBSIDIES SUNSET
The elimination of subsidies for various types of pre-FIRM policies kicked in on two trigger dates—Jan. 1 and Oct. 1 of this year. Premiums are increasing to true risk rates by 25 percent per year for four years.
Map changes also are coming to Maine as part of a Congressionally mandated nationwide push to perform updates as funds become available. Some maps now are several decades old, said Maine Floodplain Management mapping coordinator Joseph Young.
Premium increases due to map changes will phase in at 20 percent per year for five years.
FEMA was on track to produce preliminary maps for Cumberland and York counties in November. Preliminaries for Washington and Hancock counties are expected in 2014. Mapping for Sagadahoc, Lincoln, Knox and Waldo counties is on hold, awaiting new imagery from the state and three of the four counties.
Preliminary maps are subject to public review, appeals and changes before finalization by FEMA and adoption by communities.
New modeling technology makes it possible to pinpoint properties in high-risk areas, Young said. Some properties currently indicated to be in floodplains may not be, and vice versa.
Not surprisingly, FEMA expects risks to increase. FEMA predicts that by 2100, sea level could rise 3 feet; the number of flood zones could increase 45 percent; and the number of homes in high-risk areas could double, as rising seas enlarge high-risk areas.
REDUCING RISK
Homeowners and communities can mitigate risk and reduce premiums. Saco and Berwick, for example, require 3 feet of freeboard above base flood elevation, the level to which floodwater is anticipated to rise during a “100-year flood.”
Maine Geological Survey marine geologist Peter Slovinsky, in an Oct. 24 presentation to the Mid-Coast Regional Planning Commission, cited increased freeboard as “low-hanging fruit” that poses great protection and significantly lower premiums.
The planet’s changing conditions pose many uncertainties, said Young, but some communities are crafting scenario-based approaches to understand potential risks based on combinations of sea level, tides and storm surges. In 2012, for Lincoln County, Slovinksy ran scenarios showing, in worst cases, the causeway to the hospital in Damariscotta cut off, sewage treatment plants inundated and saltwater intrusion into Monhegan’s principal freshwater supply. Lincoln County planner Bob Faunce said the study helps inform zoning and infrastructure decisions for the future.
Members of Congress Chellie Pingree and Mike Michaud said they support a bill now under consideration to delay rate increases by four years and conduct an affordability study. Sen. Susan Collins said she supports Biggert-Waters but recognizes affordability challenges, and is reviewing legislative proposals.
For more information, visit floodsmart.gov.