Tri-county flood insurance policies

In Berkeley, Charleston and Dorchester counties, there were 103,879 properties with flood insurance as of this spring, according to the Federal Emergency Management Agency, with a total insured value of nearly 27 billion. During the past decade, 499 claims were filed in the three counties, and a little more than $8 million in claims were paid.

Berkeley: 28,777 policies covering properties worth $7.2 billion

Charleston: 69,542 policies covering properties worth $18.4 billion

Dorchester: 5,560 policies covering properties worth $1.4 billion

Flood insurance rates are rising for thousands in the Lowcountry.

What happens on Oct. 1

- Homebuyers are no longer able to be “grandfathered” into pre-firm sellers subsidized rate. Buyer will pay full risk rate.

- Rates go up on commercial and non-primary homes by 25 percent each year until it reflects full rate. The increase starts when policy is renewed.

- All renewed policies will incur a 5 percent tax for a relief fund.

- Rates go up on pre-firm primary homes an average of 10 percent each year until it reflects full risk.

Starting Tuesday, subsidies start to evaporate for policies in the National Flood Insurance Program, raising rates by an average of 10 percent.

But rates could skyrocket for some property owners.

The federal government retooled the program in 2012 after Hurricane Katrina, Super Storm Sandy and other disasters saddled the program with a deficit of more than $20 billion.

Under last year’s bipartisan overhaul, subsidies are being removed from second homes, rentals and businesses, as well as dwellings that have had repeated flood losses. It all spells changes for the nearly 104,000 flood insurance policies in Berkeley, Charleston and Dorchester counties, but some local and state officials fear many residents are not fully aware of the new changes.

“I know there have been a lot of suggestions over the years that the federal program be actuary sound, but now they are implementing the actuary sound rates and our citizens will be in for a tremendous rate shock,” said S.C. Department of Insurance said Director Ray Farmer.

One immediate change for all policyholders is a 5 percent tax when a policy is renewed after Oct. 1. The tax goes toward a fund to help the flood insurance program.

The situation is a double-whammy for homeowners already reeling from overall increases in property insurance premiums, which are a separate expense from the federal flood program.

Tuesday’s rate hikes will be phased in over time for those with primary residences, but larger hikes will take effect for those insuring second homes or homes that have recently sold.

At issue are homeowners whose flood premiums historically have been “grandfathered” at lower rates if they followed the rules in place at the time they bought or built their home. Beginning Tuesday, that grandfather clause will be removed in home sales.

That, in turn, has prompted some quick real estate deals in the Lowcountry and elsewhere as would-be home-buyers look to save what could be thousands of dollars in higher rates, some real estate agents said.

Agents also fear that the rate hikes could make some people reluctant to buy.

“It could change the purchase prices in some of the more flood-prone areas because they’ll be paying more in flood insurance,” said Cheryll Woods-Flowers of Coldwell Banker.

She said a client buying a home on the Isle of Palms moved up his purchase date from Oct. 15 after learning the flood insurance rate would increase from about $2,500 to $9,500.

“He was not going to purchase the property, so we had to go back and negotiate,” she said. “We had to move the closing up to Sept. 30.”

Next year he’ll still have to pay the higher rate when he renews his policy, she said, but he saved about $7,000 by closing before the rate hike.

U.S. Rep. Mark Sanford, R-S.C., said he has fielded more phone calls in recent days about the impact of the new rates on home-building and home sales.

“It has gotten on people’s radar screen and it has been of great alarm,” he said. “I was in Hilton Head on Tuesday and they were telling different stories about how the uncertainty has frozen the market there.“

Phasing out

The Federal Emergency Management Agency gradually is taking away all subsidies once used in writing policies for residents who occupy older dwellings, which were built before the flood maps were established.

The federal program subsidizes rates for about 20 percent of the 5.6 million dwellings it insures, according to FEMA.

In the case of Charleston County, the federal agency dubbed all homes built before April 1971 as “pre-firm.” In Dorchester, the date is January 1982, and in Berkeley it’s September 1983.

That means premiums on businesses in flood zones, non-primary homes and dwellings that have been severely or repeatedly flooded will climb 25 percent a year until the rates represent the “true risk” of flooding.

There should be minimal impact on homes built after the maps were established, also known as post-firm dwellings, according to Andrew E. Muller, an insurance adviser at Mappus Insurance Agency Inc.

Those properties, however, could be affected by the new flood maps FEMA is developing for the entire United States.

““It may be built to the current code, but if they redo the mapping and raise the base flood elevation for the property, that could mean higher rates,” he said.

Outreach

There have been some public meetings by Realtors and municipalities to inform residents about the flood insurance changes.

“We’ve tried to communicate it but it is an individual case-by-case matter,” said Isle of Palms Mayor Dick Cronin, who held a public information session weeks ago. “We have encouraged people to contact their insurance agents.”

Still, Cronin and others believe the impact will come for many only after the rate increase shows on a bill.

“It’s depressing because it will be so significant for so many in the Lowcountry, not just the islands.”

A common misconception is that the only people affected by the new rates are those living in downtown Charleston or the barrier islands, said Michael Sally, broker-in-charge of the Charleston real estate firm Pathway Real Estate Group.

“It seems natural for us to talk about the ones on the coast, but we forget that inland have flood zones there too,” he said. “There are watersheds.”

Delay increase

There are growing efforts across the country to persuade lawmakers to delay the rate increases.

The Senate Appropriations Committee approved a one-year delay on the rate increases as part of a $39 billion spending bill funding the Department of Homeland Security. The delay already has passed the House as part of its version of the spending bill, and now its fate is up to a future Senate vote.

The Mississippi Department of Insurance recently filed a lawsuit to try to block rates from increasing Tuesday.

Mississippi Insurance Commissioner Mike Chaney said that unless something changes, some customers could see their rates rise by more than 3,000 percent because of the law.

Farmer said he was going to review the suit to see if South Carolina would take similar action.

The Associated Press contributed to this report.

Reach Tyrone Richardson at 843-937-5550 and follow him on Twitter @tyrichardsonPC.