Working with FEMA to Rebuild South Jersey

Apr 19, 2013

There is justified anger about FEMA’s advisory base flood elevation maps (ABFE’s) and pending flood insurance rate increases. There is also a great deal of misinformation. Neither is productive to getting residents back in their homes or businesses back in operation. This is the message I took directly to FEMA Administrator Craig Fugate.           

To be clear: the ABFE’s are not the final maps for which FEMA will set structural building standards and base flood insurance rates on. While they have created anxiety for communities trying to determine a way forward post-Sandy, they have also given us an opportunity before the preliminary Flood Insurance Rate Maps (FIRMs) are issued this summer.

Mayors and county Offices of Emergency Management can and should submit accurate science and engineering data now, particularly noting land use and topographic features such as dunes, marshes and man-made obstacles to waves and flooding. Administrator Fugate assured me that FEMA will reconsider questionable conclusions within the ABFEs raised by our municipalities prior to issuing the preliminary FIRMS. I will hold him and FEMA to that promise. While residents and communities will have the opportunity to formally appeal the FIRMS upon introduction, the best option to influence the maps is before they are issued.    

While the finalized FIRMs will set flood insurance rates several years from now, an immediate increase in some existing policies under the National Flood Insurance Program (NFIP) is also causing significant stress. These increases are mandated by the 2012 Biggert-Waters Flood Insurance Reform Act and apply to policies nationwide as the NFIP provides flood insurance coverage to federally-backed mortgages. Owners and businesses that do not have a mortgage are not affected. Likewise primary residences without significant damage from Sandy will NOT see their premiums immediately rise due to Biggert-Waters, though they may see future increases depending on the final FIRMs.

Many South Jersey residents are asking, why the rate increases now?

Prior to Biggert-Waters, many policyholders paid less than the actual cost of insuring their federally-backed mortgage. In fact, more than 1 in 5 policies cost an average premium of 40 to 45 percent of full-risk coverage. Until 2005, there was no problem as the NFIP remained solvent through annual Congressional appropriations combined with premium and fee income. Then Hurricanes Katrina, Rita and Wilma caused widespread damage resulting in an unprecedented $16.7 billion hit to the program. For perspective, Sandy exacerbated the NFIP’s financial woes thus requiring an additional $9.7 billion to settle more than 140,000 claims.

Last year Congress approved Biggert-Waters with broad bipartisan support - more than seventy votes in the Senate and nearly 400 votes in the House including my own and most of the New Jersey delegation. The legislation was hugely important for lenders, brokers, buyers and sellers of properties in a flood zone to ensure real estate markets functioned properly. Previous weeks-long lapses in the NFIP’s authorization stalled the sale of tens of thousands of homes requiring flood insurance coverage, including 1,300 transactions daily in June 2010.

Key local and national groups advocated and worked for five years for passage, including the National Association of Realtors, the National Association of Home Builders, the Mortgage Bankers Association, and Independent Insurance Agents & Brokers of America. After 18 temporary authorizations and delays by individual Senators intent on ending the NFIP outright, compromise was reached and Biggert-Waters was signed into law by President Obama.

The goal is to return the NFIP to solvency by more accurately reflecting the full-risk costs in flood insurance premiums nationwide over four years for second and vacation homes; commercial properties; homes sold to new owners; homes, primary or secondary, substantially damaged or improved; properties routinely flooded with multiple claims; and property owners who willingly allow policies to lapse.

NFIP reforms were necessary to prevent the program from going bankrupt and paralysis of the real estate market. However, as South Jersey and shore communities devastated by Sandy slowly rebuild, the additional hardship of steep rate increases would be detrimental to homeowners and destructive to our economic recovery. Thus, I have introduced legislation to help ease the premium rate increases. Without reopening the debate on Biggert-Waters – which could worsen the situation for policyholders by either further raising rates or giving opponents another opportunity to eliminate the NFIP outright – my legislation seeks to expand the phase-in beyond the current 4 years to 8 years and reduce the annual premium rate increases to 12.5 percent until full-risk cost coverage is achieved.

South Jersey has had a rough six months since Sandy. Unfortunately, uncertainty remains during this rebuilding process. My staff and I are here to help ease those concerns. Most importantly, we’re here to provide the most accurate information to help your families make decisions to move forward. New Jersey residents are long-known for their resilience – a trait especially critical now.