Flood insurance rates on rise in South Dakota

PIERRE, S.D. (AP) -- Fort Pierre's director of public works has his eye on a problem that many in South Dakota's flood plains don't recognize yet.

More than 1,600 South Dakota residents will see their subsidized flood insurance rates increase substantially, even with a measure signed by President Barack Obama that eases the initial burden set in a 2012 law.

"This is going to be a problem here in South Dakota," Brad Lawrence said. "I don't know if any of them understand the predicament they're in."

In Fort Pierre alone, 30 percent of the flood insurance policies will be affected, according to Federal Emergency Management Agency data compiled by The Associated Press. The city that sits across the Missouri River from the state capital rests on two floodplains and was devastated by a flood in 2011.

The taxpayer-subsidized National Flood Insurance Policy program is $24 billion in debt. Congress moved in 2012 to make policy prices for 1.1 million people across the country reflect actual risk. In response to an outcry over premium spikes, Congress backed off slightly from some provisions in a bill signed by Obama on Friday.

But homeowners with subsidized policies can still expect annual rate increases of up to 18 percent.

"It's pretty hard for them to have their flood insurance rates go through the roof," Lawrence said.

Watertown, in far eastern South Dakota, has the highest number of subsidized policies, 192, followed by Sioux Falls' 152.

In Fort Pierre, 32 policyholders could see an up to 18 percent increase until the property reaches risk-based levels, according to the FEMA data. Under the new law, businesses and second homes will see hikes of a mandatory 25 percent — there are four facing that in Fort Pierre.

Bank West has seen many properties hit with flood insurance increases, chief compliance officer Todd Bowman said from Pierre.

"We have seen some pretty dramatic increases in premiums," Bowman said. One client began crying in the bank because she couldn't afford a $400 or $500 increase in her premium, he said.

"It's a big hit for lower-income people," Bowman said.

Flood insurance is required to obtain a mortgage for properties in flood plains.

Lawrence questioned the fairness of increases, saying the risk of catastrophic and costly floods must be worse in coastal areas.

But FEMA spokesman Jerry DeFelice said the risk-based rates derive from 100-year flood maps that are updated every five years.

DeFelice has been traveling in South Dakota to promote flood preparedness and answer questions about the national program, and said he's heard from people who are concerned about premium increases and how it affects their ability to resell their homes.