Preparing for NFIP Reauthorization Washington, D.C.  September, 2016 The National Flood Insurance Program: What Should Florida Want out of the Upcoming Congressional Reform Bill? Preparing for NFIP Reauthorization Washington, D.C.  September, 2016

20% of all flood claims arise outside of the floodplain Where do floods occur? NFIP Reauthorization December 10, 2018 4.9 million housing units are within the riverine floodplain 3.8 million housing units are within the coastal floodplain 20% of all flood claims arise outside of the floodplain

NFIP Facts Established in 1968 5.1 million policies nationwide today NFIP Reauthorization December 10, 2018 Established in 1968 5.1 million policies nationwide today All properties within the flood plain that carry federally- backed mortgages are required to have flood insurance. Private insurers to not adequately cover flood risk. Flood Insurance Rate Maps (FIRMs) drawn in 1975. Properties built prior to drawing of flood maps and their community’s adoption of floodplain regulations are considered Pre-FIRM. Risk is borne by federal government. NFIP is administered by private “Write-Your-Own” companies. Coverage is limited to $250,000 per residential structure, $500,000 per commercial structure.

Where are there flood policies? NFIP Reauthorization December 10, 2018 94% of all NFIP policies are in coastal states. Florida has more coastline than any other state except Alaska.

Coastal Floodplain Counties NFIP Reauthorization December 10, 2018 17 million properties lie in the 100-year flood plain. 16.4 million people live in the coastal floodplain. 12% of them live below the poverty level 23% of them are under age 5 and over age 65. Private insurers don’t adequately cover flood in the floodplain. FEMA is redrawing flood maps in coastal floodplain counties. SOURCE: http://stateofthecoast.noaa.gov and FEMA

About Coastal Shoreline Counties NFIP Reauthorization December 10, 2018 Home to 39% of Americans Generate $6.6T in GDP –46% of national GDP House 51M jobs Generate 56% of our nation’s energy Home to all of our ports, responsible for $1.16T in imports Home to our commercial and recreational fishing industries If America’s coastal shoreline counties were their own country, that country would rank third in global GDP, behind the U.S. and China. More than half of Florida’s counties are coastal shoreline counties. 80% of Florida’s GDP is generated there. SOURCE: http://stateofthecoast.noaa.gov

Covered properties, residential and commercial Top 10 NFIP States NFIP Reauthorization December 10, 2018 Covered properties, residential and commercial

Top 10 NFIP States NFIP Reauthorization December 10, 2018

Top 10 NFIP States NFIP Reauthorization December 10, 2018

Top 10 NFIP States NFIP Reauthorization December 10, 2018

Covering Historical Claims NFIP Reauthorization December 10, 2018 Assuming a 35% administrative (WYO) expense, no new floods and 2015 premiums, how long would it take to cover all losses since 1978? Nationally, 22 years. In Florida, 6 years. In Mississippi, 106 years.

Perceptions of Florida: Top Ten 2014 Flood Claims? NFIP Reauthorization December 10, 2018 In discussions of NFIP, Florida is sometimes portrayed as the biggest problem, the state that all others “subsidize.” This argument recently appeared in an online insurance industry blog, PropertyCasualty360.com. from PropertyCasualty360.com

Perceptions of Florida – Bad Analysis NFIP Reauthorization December 10, 2018 Since 1978, Florida has paid nearly $16B in premiums and collected under $4B in claims. Florida is an NFIP asset, and was a net contributor in 2014 as well. (What you might call “gross profit.”) from PropertyCasualty360.com and FEMA

Premium increased from $1,989 to $49,252 Recent History NFIP Reauthorization December 10, 2018 Biggert-Waters (BW12) passed in 2012 Reaction to high claims from Katrina Resulted in significant increases in premiums for some homeowners Affordability Study required by BW12 (underfunded and never completed) Homeowners Flood Insurance Affordability Act (HFIAA) passed in 2014 Addressed the most onerous aspects of BW12 Added some consumer-focused initiatives Still allows an uncertain – and expensive – future Premium increased from $1,989 to $49,252

BW12 vs. HFIAA Rate Comparison NFIP Reauthorization December 10, 2018 Rating Type Biggert-Waters HFIAA - 2014 PRIMARY HOMES PRE-FIRM Existing Policies 10% to 20% increase/year Pre-2012 rate + 5-18%/year New Policies Full risk rate Sale of Property Policy Lapse NON-PRIMARY PRE-FIRM Second homes, rentals 25% increase/year Business properties Severe Repetitive Loss GRANDFATHERED PROPERTIES 20%+ increases; full risk in 5 years Repealed POST-FIRM PROPERTIES Already paying full-risk rate PREFERRED RISK POLICY EXTENSION (After year 1 of new map) N/A Up to 18% increase/year

HFIAA: What might premiums cost? NFIP Reauthorization December 10, 2018 $350,000 replacement cost $250,000 coverage $2,000 deductible

HFIAA: What might premiums cost? NFIP Reauthorization December 10, 2018 $350,000 replacement cost $250,000 coverage $2,000 deductible

HFIAA: What might premiums cost? NFIP Reauthorization December 10, 2018 $350,000 replacement cost $250,000 coverage $2,000 deductible

HFIAA: What might premiums cost? NFIP Reauthorization December 10, 2018 $350,000 replacement cost $250,000 coverage $2,000 deductible

HFIAA: What might premiums cost? NFIP Reauthorization December 10, 2018 Home formerly in X zone, now in AE zone due to re-mapping. $350,000 replacement cost $250,000 coverage $2,000 deductible

HFIAA: What might premiums cost? NFIP Reauthorization December 10, 2018 HARDWARE $500,000 coverage $2,000 deductible

Impact on Property Values NFIP Reauthorization December 10, 2018 It is estimated that every $500 increase in property insurance premium equals a $10,000 decrease in property value*. Assuming that holds true, what would the value be of the properties in the previous slides in 10 years? Property 10-year Premium increase 10-year Loss in Value 2015 Value 2024 Value Pre-FIRM Primary, 5%/year $ 1,387.69 $ 27,753.80 $ 350,000.00 $ 322,246.20 Pre-FIRM Non-Primary, 5%/year $ 2,041.00 $ 40,820.00 $ 309,180.00 Pre-FIRM Primary, 18%/year $ 8,647.04 $ 172,940.80 $ 177,059.20 Pre-FIRM Non-Primary, 25%/year $ 23,880.00 $ 477,600.00 $ (127,600.00) Preferred Risk, 18%/year $ 1,477.25 $ 29,545.00 $ 320,455.00 Commercial Pre-FIRM, 25%/year $ 58,545.00 $ 1,170,900.00 $ 500,000.00 $ (670,900.00) *National Association of Realtors

Florida NFIP Policies by Type NFIP Reauthorization December 10, 2018

NFIP Reauthorization December 10, 2018December 10, 2018 Impact to Florida Excluding increases attributable to future remapping, current proposed increases in NFIP rates on Pre-FIRM properties alone could cost Florida up to $68 billion dollars in lost property value. Best Case Scenario Worst Case Scenario Property Type Statewide Loss in Property Value Pre-FIRM Primary Home, +5%/year $6,114,162,140 Pre-FIRM Non-Primary Home, +5%/year $1,502,176,000 Pre-FIRM Business, +25%/year $12,762,810,000 TOTAL $20,379,148,140 Property Type Statewide Loss in Property Value Pre-FIRM Primary Home, +18%/year $38,098,858,240 Pre-FIRM Non-Primary Home, +25%/year $17,575,680,000 Pre-FIRM Business, +25%/year $12,762,810,000 TOTAL $68,437,348,240

Issues to Consider in Reauthorization NFIP Reauthorization December 10, 2018 Transparency How are NFIP rates established? Affordability What happens to the economy if flood insurance becomes unaffordable? Equity Should all properties be rated based on ability to withstand a hazard, or on other factors such as whether a property is a 2nd home, a business, or whether it is pre-FIRM or post-FIRM?

Issues to Consider in Reauthorization NFIP Reauthorization December 10, 2018 Efficiency Is the current WYO structure cost-efficient? Mitigation What can/should be done to improve the ability to withstand a flood? Participation Should more properties be required or encouraged to participate in NFIP? Data and Mapping As maps are redrawn, how does FEMA ensure accuracy and incorporate local knowledge and coordinate with local governments?