EagleTribune.com, North Andover, MA

August 7, 2013

Waterfront homeowners bracing for huge insurance hike

BY Dyke Hendrickson

---- — NEWBURY — Updated federal regulations are expected to cause a notable spike in insurance rates for residences adjacent to coastal or tidal areas.

The adjusted rules are part of an initiative by the Federal Insurance and Mitigation Administration, part of the Federal Emergency Management Agency, to phase out federally subsidized flood insurance. Some new rates might take effect Oct. 1.

Several classes of residential owners will be targeted with higher rates this fall, officials say. Newbury, which has substantial amounts of residential properties on both the coastline and along coastal rivers, will be especially affected. Among those likely to see higher rates are owners of second homes and owners of properties that have experienced severe or repeated flooding.

The increases will vary. One family that paid a couple hundred dollars a month for insurance premiums is facing an annual rate of $5,000 to $6,000 under new guidelines, according to town officials. That’s an increase of over 100 percent.

Some owners on Plum Island will see higher rates, as will householders in areas near the Parker and Merrimack rivers, and in tidal and basin areas.

“Homeowners have to educate themselves,” said Doug Packer, conservation agent in Newbury. “Every case is different, and those who own residences should talk with their insurance agent and with their bank, if they have a mortgage.

“A big part of this is that the federal government wants to stop subsidizing.”

Big storms, like Superstorm Sandy last year, have cost the federal insurance program enormous amounts of money. In New Jersey alone, Superstorm Sandy resulted in $3.5 billion in claims to the Federal Insurance and Mitigation Administration.

A key element of the rates changes are guidelines created by the Biggert-Waters Flood Insurance Program of 2012.

Regulations will require the National Flood Insurance Program to raise rates “to reflect true flood risk, make the program more financially stable and change how Flood Insurance Rate Map (FIRM) updates impact policyholders.”

Federal officials say the changes will mean premium rate increases for some — but not all — policyholders over time.

The act phases out many “grandfathered” rates and moves to risk-based rates for most properties when the community adopts a new Flood Insurance Rate Map.

The regulations have the potential to affect some properties on Plum Island that were damaged last winter. Because they are building new houses or elevating damaged ones, they are losing their “grandfather” status and will be paying more.

If the structures are rebuilt, raised or moved, flood insurance rates will likely increase. Also, those with lapsed policies or purchasers of new homes will likely experience increased rates.

Regulations state, “Starting this fall, for all currently subsidized policies, there will be an immediate increase to the full-risk rates for all new and lapsed policies and upon the sale/purchase of a property. Full-risk rates will be charged to the next owner of the policy.”

Town officials in Newbury say that the base flood elevation for many areas has risen from 8 feet to 13 feet. This would mean more properties are considered in a flood plain and maps now are showing them as vulnerable.

Andrew Port, planning director in Newburyport, said that preliminary information he has about that city indicates that few changes have been made.

“The regulations coming down are an extension of a conversation of about a year ago, when we made known to homeowners that changes were coming,” said Port.

“There have been many storm events in recent years, and federal authorities are essentially saying they aren’t taking in enough money to pay for destruction and they want to get rid of subsidies and collect rates based on risk.”

Port said that homeowners should consult with their insurance companies to learn what their base flood elevation is, and how it affects their insurance rates in the future.