Flood-prone Ky. river towns to see insurance hikes

LOUISVILLE, Ky. (AP) -- As mayor of West Point, Billy Ash knows rising flood waters are a constant threat to towns like his that are nestled on the banks of the Ohio River.

But rising flood insurance rates mandated by a recent federal law are inundating West Point residents and thousands of home and business owners across Kentucky with higher premiums.

In an effort to stem a $24 billion debt in the National Flood Insurance Program, Congress enacted a law in 2012 requiring approximately 1.1 million policyholders to lose their subsidies and start paying rates based on the true risk of flooding at their properties.

"Basically for us here in West Point, that would be a death sentence," said Ash, who noted that home buyers looking to move to West Point would have to pay a new, sometimes staggeringly high rate on the purchase of a home in a flood plain.

Congress has backed off the plan for onerous one-time increases, after an outcry from taxpayers over the rising costs. Lawmakers this month amended the 2012 law to require policy payers to instead take on annual premium increases as high as 18 percent year after year, until the government is collecting what it needs to pay out claims. Owners of businesses and second homes are facing a mandatory 25 percent increase each year. President Obama signed it into law on Friday.

In West Point, which was founded by settlers in the late 18th century and now has about 800 residents, there are 166 properties with flood insurance policies, and as part of the new law, 104 single-family homes would see annual rate hikes of up to 18 percent, according to federal data obtained by The Associated Press.

The AP combined four Federal Emergency Management Agency datasets and linked it to population information to create a comprehensive snapshot of National Flood Insurance Program statistics in more than 18,000 communities across the country.

In Kentucky, there were 24,617 properties with a total of $3.7 billion in flood insurance coverage at the end of December. About half of those properties will have adjusted premiums, including 8,071 single family homes or condominiums that will see annual increases in premium costs of up to 18 percent. About 1,400 businesses across the state will see a flat 25 percent rate increase.

Statewide, total flood insurance premiums increased by more than $1 million from December 2012 to last December, according to the data. The federal program has issued about $290 million in payments to Kentucky since it began.

Lisa Brewer said the flood insurance on her West Point home and surrounding 100 acres was set last year to increase by $700 a year, on top of the $1,400 she and her husband already pay. They decided to investigate the rate, and found that only a portion of grassland on their acreage was on a flood plain, so they were able to drop their policy after paying it for more than a decade.

"They were going to jack it up unreal," Brewer said. "I don't think a lot of people in West Point can afford it."

Ash, who has lived in West Point all his life, said he found that his insurance would have gone from about $600 a year to about $2,000 under the original increase plan, before the staggered increases were introduced.

Other old river towns like Augusta, Silver Grove and Greenup along the Ohio River in northeastern Kentucky, and Falmouth along the Licking River in Pendleton County, have a high percentage of properties that will see yearly insurance rate hikes, according to the data.

In those four river towns, there are a total of 646 properties with flood insurance. Of those, 577, or 89 percent, will face rate hikes, including 369 single-family homes or condos that will see up to an 18 percent hike yearly.

Many of the insured properties included in the federal data are along the Ohio River, but Appalachian residents who live in mountainous areas where flash-flooding is common will also see hikes.

In the eastern Kentucky cities of Hazard, Paintsville and Jackson, 420 of the 499 policies in force, or 84 percent, will be hit with the increases. Of those, 266 are single family homes or condos, according to the data.

Some of the rate hikes will be hard to predict. The law caps the increase of any individual policy at 18 percent. But increases for most property classes are capped at an average of 15 percent per year, meaning individual increases could be lower. FEMA has estimated that it needs to squeeze $1 billion to $2 billion more per year in premiums out of policyholders still enjoying subsidies to put the program on solid actuarial ground.