North Dakota Town Sees Rising Flood Insurance Costs

Had Greg Larson, a Realtor and riverside homeowner in Bismarck, and his family changed their flood insurance policy, their cost would have gone from $705 a year to $4,200.

Increases in flood insurance rates are making some of Bismarck-Mandan’s prized real estate on the banks of the Missouri River more expensive.

Many people don’t carry flood insurance unless they’re living in the flood plain and required to, which has led to high costs from floods. In an attempt to get more buyers and expand the risk pool, the National Flood Insurance Program was subsidizing premiums instead of forcing buyers to pay the cost of actuarial flood risk. Because of that, the program is deeply in debt.

To change that, Congress passed the Biggert-Waters Flood Insurance Reform Act in 2012, which is phasing out subsidies and allowing for the remapping of flood-prone areas. The remapping could require some to buy insurance where it was previously optional, and at higher rates.

“They were trying to make the program solvent,” Larson told the Bismarck Tribune.

“I don’t think anyone anticipated this.”

The total paid out in North Dakota for claims, $257.5 million since 1978, dwarfs the cost for disaster assistance. North Dakota received $96 million in direct grant assistance from FEMA in 2011. FEMA spent another $93 million on other assistance, including trailers to shelter those displaced from their homes.

Larson, who has a house on Fox Island, was doing research on a new flood insurance policy when he learned of the effect changes would have on his flood-plain home.

In Burleigh County, 106 policies will be affected by subsidy phase-outs, said Jeff Kline, state National Flood Insurance Program coordinator. In Morton County, 43 policies will be affected.

The average premium has been $699 in Burleigh County, Kline said. He has heard of policies doubling or tripling.

“People are getting sticker shock,” Kline said. “Now all of a sudden you’re going to pay through the nose. … It’s caused a lot of heartburn.”

Kline said the Bismarck-Mandan area hasn’t had the lower voluntary participation in the flood insurance program plaguing many surrounding states. Property owners are required to purchase flood insurance if they have a federally backed loan or mortgage within a flood hazard area. Many of those not in the flood zone who were flooded in 2011 had to buy policies as a condition of receiving a SBA loan or FEMA grant.

There are 1,032 total policies in Burleigh County with only 420 in the flood plain, Kline said. In Morton County, 85 of 324 policies are in the flood plain.

In Stark County, where flooding wasn’t as devastating in 2011, there is a much higher rate of required policies. Of the 124 policies, 81 are in the flood zone, Kline said. Other similar counties include Mercer County, with 82 out of 110 policies being in the flood plain, and Williams County, with 27 of 55 policies in the flood plain.

This summer, subsidized rates for non-primary residences, businesses and repetitive-loss properties were phased out. Other targeted properties were eliminated in October. To help people adjust, premiums for existing subsidized policies will be gradually raised by no more than 25 percent annually.

Those with existing flood policies on their primary residence will continue to pay the same rates until they decide to sell the property, the insurance policy lapses or they have repeated flood losses.

Kline said because of this, he has heard the higher rates have caused people to reconsider living on the river. Some home sales are falling through when the buyer gets wind of the cost, he said.

That could lead to properties sitting on the market longer, said Nancy R. Willis, government affairs director for the North Dakota Association of Realtors.

Artificially cheap insurance also has encouraged more waterside development. Because of the remapping portion of Biggert-Waters, more homes potentially could be added to the flood plain.

“For our area, (remapping) really had to do more with the tributaries,” like Hay Creek and Apple Creek, said Burleigh County Building Official Ray Zeigler.

Zeigler said those mapping changes are supposed to go into effect this year, but may get postponed because of questions raised during public comment. He does not know the number of homes that could be affected or when the new map might be finalized.

In Morton County, the map was updated in 2005, Kline said. Now FEMA is revisiting a stretch of the Heart River in the county, examining the levee and dike system meant to protect the area.

Previously, those structures were recognized as providing flood protection, Kline said. If they don’t meet FEMA standards, though, they could be decertified, nullifying those public investments in the remapping process and expanding the flood zone in the area.

Willis said its these worries about FEMA adding areas that haven’t flooded in the past that have led to the association’s support of legislation to stall Biggert-Waters provisions until an impact of premiums study can be completed and an updated flood map finalized.

The Senate bill is known as the Homeowner Flood Insurance Affordability Act and is expected to be voted on by the Senate this week.

“I think the problem will get fixed, but right now it’s kind of scary,” Greg Larson said. “If the impact is what they say it’s going to be right now, it could be serious.”