Insurers Must Delay Flood Reform

Angelyn Treutel Zeringue
Insurance Experts' Forum, January 3, 2014

The Homeowner Flood Insurance Affordability Act, with 28 cosponsors in the Senate, is expected come up for vote the week of January 6. From this agent’s viewpoint, this is a severely onerous piece of legislation that was neither understood nor thought-through before it was passed. Even original sponsors of the bill, such as Rep. Maxine Waters  (D – CA) admitted there are “unintended consequences” that justify a 4-year delay, which is called for in the Homeowner Flood Insurance Affordability Act.

I live in a coastal region that was devastated by Hurricane Katrina nine years ago, and I work daily with real Americans who are detrimentally affected by the flood reform. Personally, I currently have a rate of $400, which is moving toward an actuarially sound rate of $8,500. I think this is completely ridiculous. I agree that $400 is too low, but $8,500 is a showstopper.

Every day, real estate deals are falling through in my area because citizens are afraid of what is happening with the flood reform. One of my young agents, with a family of five, will not be able to afford her mortgage, because her flood insurance is required for her to continue her loan, and her actuarially sound flood insurance rate is over $11,000 per year. Foreclosures are occurring daily; people who are moving out of the area are unable to sell their homes. Businesses are even closing because they can’t afford the high insurance cost, and this puts people out of jobs.

Our vacation community is destined to become a ghost town because of the excessive cost to insure a secondary home. The irony is that the Federal Emergency Management Agency (FEMA) and the Mississippi Emergency Management Agency have poured billions into our area to encourage development following Hurricane Katrina, and now the property owners will be unable to rent out their properties because tenants will not be able to pay enough rent to cover the insurance cost. This is a terrible situation.

The insurance industry strongly supports flood insurance reform, but it needs to be implemented in a way that doesn’t destroy communities that have flooded in the past or have been remapped. We can’t trade one disaster for another.

What many do not understand is that the reform requires the elimination of “grandfathering.” This means that homes and businesses that were built to all of the codes in effect at the time of construction are now being penalized because FEMA changed the rules and elevation requirements after remapping the area. It is not fair to change the rules after citizens have built homes and businesses to meet all codes in place, and then allow FEMA to change the flood maps and have the owner be penalized through no fault of their own. This is a United States issue — not just a coastal issue — because any area remapped by FEMA will be exposed to this problem.

The other looming issue this creates is that people will abandon their homes and businesses, which will destroy the banks and real estate markets. And the people not required to have flood insurance because they do not have a bank loan will just “self-insure”; all of this depletes the premium dollars going into the flood insurance program, which already is unable to make ends meet. And the spiral continues …

Congress needs to do what is right for the American citizens and delay the implementation of the Flood Insurance Reform until it can be done accurately and fairly. 

Angelyn Treutel Zeringue, CPA, is president of Southgroup Insurance Gulf Coast and the chair of ASCnet's Industry Solutions Industry Initiatives Committee and the past-chair of the IIABA Agents Council for Technology.

Readers are encouraged to respond to Angelyn by using the “Add Your Comments” box below. She can also be reached at

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