City Concerned with High Flood Insurance Premiums

CAPE MAY- The high cost of flood insurance is causing concern for the city and, no doubt, its residents, when they receive price quotes to cover their homes this year.
The city is reserving $120,000 in the 2013 budget to purchase annual flood insurance for Convention Hall. At a Feb. 4 City Council meeting, City Manager Bruce MacLeod said part of the $120,000 may include $20,000 from the Joint Insurance Fund. He said, as has been reported by the media, price increases are expected for flood insurance, most likely a 20 percent increase.
Mayor Edward J. Mahaney Jr. said the expected 20 percent increase in the flood insurance premiums is a number the city was given by the Federal Emergency Management Agency (FEMA), the Department of Environmental Protection and the insurance industry. He said part of the reason for the increase is the Biggert-Waters Flood Insurance Reform and Modernization Act signed into law in July 2012. Mahaney said one prong of the bill went undetected by the news media.
Since the flood insurance program started years ago, there has been a subsidizing of flood insurance, he said. After Hurricane Katrina hit New Orleans, the claims from that storm wiped out all the financial resources that were available under the National Flood Insurance Program (NFIP).
Mahaney said to insure NFIP remains self-liquidating, the Biggert-Waters Bill contained a clause that made it mandatory there be no more subsidies. The bill notes that flood insurance premiums should accurately reflect the current risk of flood to property which is made after the effective date of any revised or updated flood insurance rate map. Mahaney said homeowners flood insurance should increase this year from 20 to 25 percent. The bill states higher premiums will be phased in over a five year period at a rate of 20 percent.
Mahaney said the increased premiums have nothing to do with Hurricane Sandy and if a homeowner had any loss.
“It’s gotten to a point where I think that the average homeowner may not be able to afford flood insurance anymore,” said former mayor Jerry Gaffney, during public comment. He said since he doesn’t have a mortgage on his home, he has dropped his flood insurance coverage.
Gaffney said it was a serious situation when the city was anticipating paying over $100,000 for flood insurance coverage for Convention Hall. He said of that the city was self-insuring $100,000, $50,000 for the building and $50,000 for contents.
Mahaney said it was priority of Cape May to assist residents that suffered losses from Hurricane Sandy and to work with state and federal governments to address issues such as new FEMA maps and regulations, NFIP, the availability of insurance for homeowners, the unique issue of 600 historic buildings in the city and low lying portions of the town. He said he wanted to ensure property owners can obtain flood and homeowner’s insurance at a price that’s affordable.
Flood insurance was still available but “at a tremendous high cost,” Gaffney said. “Try to get a homeowner’s policy in the City of Cape May or anywhere along the coast, forget it. You just can’t do it. You have to go to Lloyd’s of London.”
Mahaney said he told FEMA representatives it was almost impossible to get flood or homeowner’s insurance if you live east of the Garden State Parkway.
“We don’t want to see people who have lived here and owned property here for years be priced out of the market, said Mahaney. “We also don’t want to see a general downturn in the real estate market where having homes at the shore is no longer affordable and therefore your tourist related industry suffers.”
Mahaney said he journeyed to Trenton twice in the last 10 days and would return three times in the next 10 days. He said mayors were working as a group to address the flood insurance issues.
“We’re putting together a very detailed proposal from each town on the engineering, the legal, the economic and the social values that are involved in this particular situation where tourism is not only a life safety and economic venue for us, it’s also the reason why we can all afford to live here…” said Mahaney.
He said a public meeting would be held as soon as the city gets more definitive answers from FEMA in writing.