Today’s flood insurance market is being driven by a pair of 5-year-old events — Hurricane Sandy, which wreaked havoc on communities along the Long Island Sound and the Hudson River, and the passage of the Biggert-Waters Flood Insurance Act of 2012, which sought to significantly increase premiums in the federal National Flood Insurance Program. For many home sellers and buyers preparing for the effects of climate change and rising sea levels on shoreline properties, flood insurance can be a make-or-break consideration.
“The most common question a home seller gets is not whether you have an old house or whether the house uses gas or oil,” said Michael Barbaro, president of the Connecticut Association of Realtors Inc., a statewide trade group. “It’s whether the house is in a flood zone. Even the least sophisticated of buyers are leading with that question.”
In a December report, “Under Water: How Sea Level Rise Threatens the Tri-state Region,” the Regional Plan Association in Stamford said sea levels in the metropolitan region could rise around one foot as soon as the 2030s and by three feet as early as the 2080s. A 6-foot rise could come in the early 22nd century. That would bury the Metro-North Hudson rail line and its 12 stations between New York City and Poughkeepsie along with Amtrak’s Empire Corridor line, while Connecticut’s coastal cities would see large chunks of their communities permanently under water, according to the report.
Even smaller incremental increases in sea levels could bring damage when coupled with increased storm activity that many scientists attribute to climate change. “Places that got flooded every 100 years will be flooded every 25 years,” said James O’Donnell, professor of marine sciences at the University of Connecticut. “And insurance is linked to the risk of flooding. If the risk becomes four times greater, insurance rates could become four times higher.”
In the Hudson Valley, “Sandy hit at high tide, and the strength of the storm created a surge up the river,” said Jeffrey Anzevino, director of land use advocacy at Scenic Hudson Inc., a nonprofit regional environmental protection organization in Poughkeepsie. “Levels rose up to nine feet of water in some areas. Some of the marinas that were damaged in the storm didn’t come back after the flooding.”
Yet five years after the hurricane, Anzevino noted, most communities on the Hudson River are abuzz with commercial and residential property development projects. “There has been uptick in development on riverfront,” he said, adding that the financial crisis in 2008 was more paralyzing to the area than Sandy. “I don’t see evidence of sea level rising deterring development along the river.”
On the Long Island Sound shore in Fairfield and Westchester countries, however, some property owners in the luxury homes market face a challenge in the wake of Sandy’s damage. “People are not adjusting prices of the homes for sale to accommodate flood insurance,” Barbaro said. “Sellers are not driving prices down and people are just not buying.”
In the town of Fairfield, eight homes were destroyed and 2,000 residential properties along Fairfield Beach sustained varying degrees of damage from Sandy. Fairfield’s town government successfully pursued admission into the National Flood Insurance Program Community Rating System administered by the Federal Emergency Management Agency (FEMA).
Since last October, participation in the FEMA rating system program allows Fairfield residents to qualify for a 10 percent discount on premium costs for flood insurance policies issued by the National Flood Insurance Program for special flood hazard areas. “This was an opportunity to save residents upwards of $400,000 a year,” said James R. Wendt, the town’s assistant planning director and Community Rating System coordinator.
Fairfield is only the eighth Connecticut municipality and the third Fairfield County community to participate in the Community Rating System, following Westport, which signed on in 1995, and Stamford in 2002.
The Biggert-Waters Flood Insurance Reform Act extended the National Flood Insurance Program for a five-year period while making several changes — most notably, 25 percent premium hikes — designed to solidify the program, which was $17 billion in debt by 2012.
“The program is now $25 billion in debt,” said Jenn Fogel-Bublick, an attorney and spokesperson for SmarterSafer, a Washington, D.C.-based coalition whose stated mission is to advocate for environmentally responsible, fiscally sound approaches to natural catastrophe policy that promote public safety.
Fogel-Bublick said language in the new law created confusion regarding private flood insurance, with some mortgage lenders erroneously believing that prospective homeowners could only use National Flood Insurance Program policies. The U.S. Government Accountability Office in a report last June said that federal regulators “have issued joint proposed rules to implement the Biggert-Waters Act definition of private flood insurance, but have not yet finalized them,” resulting in “uncertainty among stakeholders about which private policies would satisfy the (federal government’s) mandatory purchase requirement.”
SmarterSafer voiced its support for the Flood Insurance Market Parity and Modernization Act, introduced in Congress in 2016, which seeks to expand the market by allowing states to license and regulate private flood insurance carriers.
“NFIP is important, but not perfect,” said Fogel-Bublick. “Private line insurance is available in every other line of insurance.”
Yet not everyone sees private flood insurance as a panacea.
“I think the concern is that right now, the federal government insures everyone,” said Barbaro of the Connecticut Association of Realtors. “If you are in a flood zone with a federally backed mortgage, you’re in that (NFIP) pool. But there is the fear that the private market would cherry-pick areas that are not likely to see flooding, leaving the federal government to pick up high-risk areas.”
Daniel O’Connor, senior account executive at the Shoff Darby Insurance Agency in Norwalk, said the Homeowner Flood Insurance Affordability Act, which took effect in 2014, postponed the steep premium rate increases of the Biggert-Waters bill. And structural changes to some shoreline properties — most notably, raising buildings on solidified stilts — has helped keep some premiums down, he said.
“Shoreline property in a flood zone is more expensive,” O’Connor said. “But with many houses raised up, flood insurance is much less expensive — and in some cases, it is actually quite affordable. Of course, there is the cost of raising up the house.”