Keys homeowners face skyrocketing flood premiums [Florida Keys Keynoter, (Marathon, Fla.)]

Oct. 02--Tuesday, the same day virtually all of the federal government closed down because the U.S. House and Senate couldn't agree on a plan to continue paying the government's bills, Keys residents and others were hit with another whammy.

That's the day thousands of Keys property owners started losing federal subsidies for their flood insurance policies -- meaning skyrocketing rates are coming and, as a result, could shock what had been an improving real estate market.

There are 11,896 properties in Monroe County affected, according to the Miami Herald. The breakdown:

--Unincorporated Monroe, 5,391.

--Key West, 3,453.

--Marathon, 1,446.

--Islamorada, 887.

--Key Colony Beach, 678.

--Layton, 41.

The reason: The 2012 Biggert-Waters Flood Insurance Reform Act that took effect Tuesday. The law eliminates subsidized rates from the Federal Emergency Management Agency's National Flood Insurance Program, which almost every Keys homeowner with a mortgage depends on for affordable coverage.

Owners of second homes and "pre-FIRM" houses will bear the largest burden to begin with. Pre-FIRM refers to houses built before January 1975, when FEMA's flood insurance rate map came into existence. Many of those older homes were built at or below base flood elevation, meaning they're considered a liability.

The effects of the law could be disastrous to a slowly but surely recovering Keys real estate market.

"Clearly, if these new premiums go into effect it will have chilling effect on the real estate market, and it already has to a certain degree," said Brian Schmitt, broker at Coldwell Banker Real Estate. "We've certainly gotten quotes for people that look more like mortgage quotes than insurance premiums."

In a Sept. 17 letter to Florida senators Bill Nelson and Marco Rubio, Gov. Rick Scott notes Florida families have paid $16 billion into the National Flood Insurance Program -- four times their claim reimbursements -- in the past 35 years.

And if Florida is a donor state, many believe that Monroe County is perhaps the largest donor of the state's 67 counties.

"We build to stronger building codes because we've experienced floods for a long time, whereas other areas like the ones in New Jersey and Pennsylvania damaged by [Hurricane Sandy don't]. To a large degree, I think we're paying for an event that occurred hundreds of miles away from us," Schmitt said.

Mel Montagne, vice president of sales for Keys Insurance Services, said the average annual flood premium is $650 to $1,000. The increases are staggering, he said.

"They're huge. I quoted one up in Key Largo for a local Realtor and the premium was $15,000 and I know that that pretty much killed the deal," he said.

Ava Bianchino, an Exit Realty agent and board member at local nonprofit Fair Insurance Rates in Monroe, said the rate hikes will also affect ground-level homes whether they're on the water or not.

"They've pretty much devalued ground-level homes. Selling those, you'd have to [pay cash] to not pay those kind of premiums," she said. "I don't want to panic everyone, but this is going to be very impactful to the Keys."

Montagne also sits on the FIRM board and said the group has formed a separate committee to combat flood insurance increases.

FIRM concentrates most of its efforts fighting always-increasing windstorm insurance rates by state-run Citizens Property Insurance Corp., which carries the vast majority of wind policies in the Keys.

FIRM was instrumental to Citizens capping premium increases for Keys homeowners to 10 percent per year. "We have to attack it on a Legislative front and see if we can get put on a glide path like we were at Citizens," Montagne said.

According to the Herald, the National Flood Insurance Program has been running a $24 billion deficit since Hurricane Katrina struck New Orleans in 2005.

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