New flood insurance requirements can mandate coverage for homeowners; impact on Key Biscayne?

Legislation passed this week by the Florida Senate, hoping to help both insurers and the insured, might have opened the floodgates to more concerns for many property owners who soon will be required to have flood coverage.

The bill not only will slowly raise the rates of more than 1.1 million policyholders of Citizens Property Insurance Corp., but also will require -- over time on a tiered basis -- maintaining flood coverage that is at least equivalent to the coverage provided by the National Flood Insurance Program.

It would be the first mandate of its kind in the country, should the bill pass a House vote. All policyholders under Citizens across the state would be required to purchase flood insurance regardless of whether their properties are in areas prone to inundation.

On Key Biscayne, that particular impact should be minimal, according to experts.

"I don't think that the flood requirement is much of an issue for coastal customers of Citizens as, for the most part, they would already have flood insurance in place," said Alejandro Perez-Duque, CEO of the Key Biscayne-based PVG Insurance Group, now in its 20th year.

"In Key Biscayne, for example, the percentage of homes with flood insurance in place is extremely high, if not one of the highest anywhere, given that we are in a special flood hazard zone. And the residents, for the most part, can afford to have flood insurance."

Only 19% of all Florida homeowners carry flood insurance coverage, according to the Insurance Information Institute, leaving some 7 million households without that coverage. If mandated, the legislation indicates that Citizens -- the insurer of last resort in the state -- "may deny coverage" to those who refuse and maintain such coverage.

By requiring flood insurance, it eliminates debate -- and, likely, litigation -- as to what caused the flooding damage since windstorm coverage alone does not cover flooding.

According to the Federal Emergency Management Agency (FEMA), flooding is one of the more common natural disasters in the U.S., and it notes that a home can sustain $25,000 in damages from just one inch of water inside.

Jeremy Calleros Gauger, the Village of Key Biscayne's Director of Building, Zoning & Planning, strongly recommends flood protection "because all of the Key is in a flood zone to some extent."

Flood insurance is not a requirement by the Village or the State, but mortgage providers typically will make it mandatory.

Several factors, including the number of properties with flood protection, affect FEMA's rating system for each community, which can keep premiums down. "It encourages maximum coverage," Calleros Gauger said.

So, say, you're living on the fifth floor of a condo. Do you need flood insurance?

"But your condo (HOA) needs it, because it touches the ground in the danger zone," Calleros Gauger said. "But the individual unit on the fifth floor doesn't have to have separate coverage."

How the plan would work

The legislative bill was approved just two months after Hurricane Ian caused catastrophic damage in areas of Florida where almost no one had flood coverage.

The new Citizens flood requirement would be phased in over the next four years, starting in April with those who own property in a flood zone.

Applicants insured by Citizens can obtain flood insurance for new polices starting in March.

The phased-in flood requirement establishes:

For risks located in areas designated by the Federal Emergency Management Agency as special flood hazard areas, flood insurance must be secured for new Citizens policies with an effective date on or after April 1, 2023, and at renewal for Citizens policies that renew on or after July 1, 2023.

For all other risks, the requirement to obtain flood insurance at policy issuance or renewal is effective:

* March 1, 2024, for policies insuring property to a limit of $600,000 or more.

* March 1, 2025, for policies insuring property to a limit of $500,000 or more.

* March 1, 2026, for policies insuring property to a limit of $400,000 or more.

* March 1, 2027, for all other policies.

The average cost of flood insurance in Florida is $562 for policies purchased through the national program, but property owners might get a better deal through private companies.

According to ValuePenguin, the average price among Florida's largest cities range from $389 to $950. Miami, with its leading 51,595 flood policies in place, covering $11.217 trillion in assets with $20.121 million in premiums, comes in at an average of $390, just $1 more than the low end held by Port St. Lucie.

Flood insurance rates are calculated based on several factors, including the property's elevation, the building materials and distance to the coast. One report stated that flood insurance can range from $190 a year to more than $2,000.

Some say it will be interesting to see how many Citizens policy holders will jump to a private insurer just to evade having to pay an added flood premium.

Pricing based on several factors

Longtime Key Biscayne resident Michele Estevez, founder of Michele & Associates, a property management group, said a lot of the pricing is based on flood exposure (near the coast or river banks), the ground level and elevation.

Some properties she has managed are in nearby Coconut Grove and Coral Gables, where flood insurance is not a requirement.

Estevez mostly manages homes and smaller units, rather than high-rise apartments.

But, she has noticed that if the construction is all concrete, flood insurance often comes in at a higher cost than windstorm protection. And, in construction that consists of concrete at the base, but wood and trusses higher (and not a concrete roof), windstorm costs could be higher, or similar, than flood protection.

One example, she points out, is a six-story concrete building, which has a $241,000 annual windstorm premium, but only a $9,800 flood premium, in comparison.

"And the first floor is usually a parking garage or lobby; they typically don't have living units," she said, wondering why flood premiums would still be so costly.

Another example she sees is an entire unit of townhouses, all concrete. In that case, the windstorm premium is much lower than the flood premium. In one case, she's seen a townhouse unit charged $65,000 for wind protection and $190,000 for flood coverage.

And, while windstorm premiums have continued to rise for her managed properties the past few years, Estevez said some flood insurance premiums for her properties have stayed the same, for the most part.

"One even went down last year, but don't ask me why," she said.