Flood insurance regs create a surge of uncertainty

Island homeowners must confront baffling insurance policies tied to fluctuating flood maps.

Water Street in Vineyard Haven lived up to its name during Hurricane Sandy. — File photo by Ralph Stewart

On Wednesday, Governor Deval Patrick signed a bill aimed at relieving homeowners beset with rising flood insurance premiums. The new law prohibits creditors from requiring homeowners to buy flood insurance policies that exceed the balance of their mortgage. Additionally, it bans mortgage lenders from requiring coverage for the contents of the home or including a deductible of less than $5,000.

Underscoring the confusion that continues to bedevil consumers and vendors, the law, which arrived on the governor’s desk as H 3783, an Act Relative to Flood Insurance, also stipulates that homeowners fully understand that minimum flood insurance protects only their outstanding mortgage interest, not the value of their home. H 3783 is just the latest in a flurry of federal and state legislation that has been passed in the past two years, to try to bring order to a flood insurance program awash in confusion and red ink.
“The deeper you look into this, the more complicated it gets,” U.S. Representative William Keating said in a phone interview with The Times. Mr. Keating represents the 9th Massachusetts district, which includes the Cape and Islands. Mr. Keating played a key role in the drafting and passing of the Homeowner Flood Insurance Affordability Act (HFIA), the most recent federal flood insurance legislation signed into law in March by President Obama.

HFIA repeals and modifies a number of provisions in the 2012 Biggert-Waters Flood Insurance Reform Act, which was enacted after emergency bailouts from Congress were required to keep the National Flood Insurance Program (NFIP) program afloat after taking a $22 billion hit from Hurricane Katrina. Many congressmen were inundated with complaints from their constituents who felt they were paying the tab for wealthy owners of vacation homes.
“It was a hard job convincing people in Congress this wasn’t the case,” Mr. Keating said. “I was told directly by other congressmen that these are rich people with waterfront homes. I tried to tell them that these are mostly family homes, many of them passed down through generations, but that was the mindset.”

Mr. Keating owned a house in Edgartown for 10 years and said he is well aware of the financial challenges Islanders face, along with the misconception that it’s an exclusive enclave for the elite. “People in congress have used the Vineyard as an example of flood insurance helping the rich,” he said. “That perception was around even back in my State House days.”

Drowning in Biggert Waters
The impact of Biggert Waters was immediate in Massachusetts. Homeowners who’d never been in a hazard zone suddenly found themselves with crushing flood insurance bills. Insurance rate hike horror stories were legion.

“I had a client who was on the old flood insurance plan who was paying $500 a year,” said Deb Martin, an insurance consultant with Grassi Insurance in Wareham “After Biggert Waters, it shot up to $60,000 a year. This was with a house that was almost 100 years old and had never been flooded.”

Biggert Waters also eliminated grandfathering — no longer were buildings allowed to keep their original flood-risk rating even if the zone designation changed with new Federal Emergency Management Agency (FEMA)  flood zone maps. In addition to skyrocketing premiums, second homes were hit with a 25 percent annual tax increase. Grandfathering of insurance policies was also eliminated, so when a home was sold, flood insurance rates went to actuarial rate immediately. People who bought homes after July 2012 became ineligible for subsidies after October 1, 2012, the day the new law went into effect. Biggert Waters also mandated that FEMA redraw coastal flood maps, and to do it quickly. Flood risk determinations were made for the high water mark in a 100-year storm — a model where there is a 26 percent chance of flooding over the span of a 30-year mortgage.

HFIA spells relief
HFIA capped residential insurance rates for primary homes at 18 percent and restored grandfathering. “Grandfathering is a big thing for Massachusetts because a lot of our homes are older homes,” a member of Mr. Keating’s staff said on background. “Under Biggert Waters when a home was sold or transferred it went to actuarial rate immediately. The new bill repealed the trigger. It was really devastating, especially for our district.”

HFIA also delayed rate hikes for four years while FEMA re-evaluates the accuracy of its flood maps. HFIA also includes the Keating Provision, which “guarantees that community maps are drawn with methodology that is appropriate for their region, ensuring that flood insurance premiums will be fair and accurate,” according to a press release from Mr. Keating’s office.

The Keating provision was set in motion shortly after FEMA released preliminary flood maps last fall. “Once we got a close look at the new maps, we felt like they just didn’t look right,” another Keating staffer said. “We felt like we needed to do our own study.”


An independent review of FEMA flood maps, by Dr. Brian Howes of UMass Dartmouth’s School of Marine Science and Technology and John Ramsey of Applied Coastal Research and Engineering, concluded that FEMA had utilized the Direct Integration Method (DIM), a Pacific Coast wave model, as opposed to one based on the Atlantic coastline in New England. The study concluded that the SWAN model — Simulating Waves Nearshore — developed by the Dutch, was a more accurate wave model for the Atlantic Coast wave pattern.
Based on the new study, the town of Rockport successfully appealed the new FEMA flood maps in February. “I expect FEMA to rectify the incorrect Massachusetts maps based on their recent approval of Rockport’s appeal,” Mr. Keating said in a press release after the decision. Other towns in New England are also preparing appeals on the Rockport decision. However, at present, FEMA is still using the DIM methodology.
“There are many different acceptable models,” FEMA engineer Kerry Bogdan said in an interview with The Times. “That doesn’t mean what we did is wrong.”
“My view is they’re digging in,” Mr. Keating said. “The law requires FEMA to enhance coordination with communities before and during mapping and to report certain information to members of Congress for each state. There’re questions throughout the whole process regarding the accuracy of the maps. A lot has been placed on FEMA in that respect, but the methodology has to be corrected.”

Mr. Keating added that he’s had discussions with Homeland Security Secretary Jeh Johnson on the matter and that the oversight committee to homeland security has been receptive to a hearing, which he expects to hold this fall.

Although FEMA was due to release revised preliminary maps for Martha’s Vineyard this month, Ms. Bogdan said the maps will be made public in late fall or early winter. After the maps are released, there is a 90-day comment period where towns or townspeople can challenge FEMA findings. Individuals can challenge the map by hiring an engineer to draft a certificate of elevation, the cost of which can range upwards of $1,000. “We try to time the release of the maps to the 90-day period close to town meeting,” she said. The maps do not become official until they are approved at town meeting. Until that time, the 2010 maps for the Vineyard will be the FEMA standard.

Congressman urges action
Mr. Keating stressed that the most effective action for Islanders will be collective action. “We’re urging communities to become part of the Community Rating System,” he said, referring to the FEMA program that rewards communities that take action to reduce flood damage to insurable properties. “You’re not just benefiting individuals, you’re benefitting the community.This can decrease premiums for people from 10 percent up to 45 percent. In many cases, towns are already doing what it takes to earn credits.”

None of the six Island towns are enlisted in the Community Rating System, according to the FEMA website.
A staff member from Mr. Keatings officesaid there are staff members available who can set up a conference call between town officials and FEMA about joining Community Rating System.
“The clock is ticking on the reform: three and a half years seems like a long way off, but it’s not,” Mr. Keating said, referring to the grace period that was part of HFIA. “The sooner we get more resolution the better it is for everyone. This affects the way people make plans and there are lot of other issues tied into this. We don’t want to be waiting till the 11th hour.”

Mr. Keating said Islanders can get help with flood insurance on a case-by-case basis from his staff by calling his Plymouth office at 508-746-9000.