St. Petersburg flood insurance provider Neptune Flood is already one of the nation’s largest, with around 227,000 customers. But if threatened cuts to the country’s top program come to fruition, that number could rise, along with the region’s heightened hurricane risks.
This week, staffers at the Federal Emergency Management Agency announced hundreds of job cuts, continuing a reduction of the federal workforce, since President Donald Trump took office a month ago.
“While we are aware of the reported cuts to FEMA staff, we do not yet know if any of those cuts impact the National Flood Insurance Program,” said Trevor Burgess, chief executive officer of St. Petersburg-based Neptune Flood.
According to reports, one of those fired was Christopher Page, who had been with the agency since 2010, and recently became chief of the NFIP, which, with 3.7 million policies, is by far the largest flood insurance provider in the country. FEMA administers the program.
How things will play out is uncertain, but what is clear is that, at some point, the NFIP’s possible losses could be Neptune’s gains.
According to Burgess, change at FEMA was inevitable.
“Until 2021, they provided massive subsidies, which meant a couple of things, mostly that they were not charging accurate rates,” he said. “So, they were acting like an insurance company but weren’t charging accurate prices, and the cost of that is passed on to U.S. taxpayers.”
Burgess said FEMA is now in debt around $20 billion to the U.S. Treasury.
Many homeowners in the region ended up with perceived bargains that were not bargains, after all.
“If you tell someone that it’s going to be $500 a year for flood insurance and you’re right on the water in Tampa Bay, you’re going to say, ‘Oh, that’s not bad. I’m going to have a great home for only 500 bucks.’”
Burgess said that many owners, faced with an accurate bill in the thousands, would have simply chosen not to build in flood and evacuation areas.
In 2021, the NFIP debuted Risk Rating 2.0, which meant homeowners had to pay the actual price. The problem? Around 3.8 million existing customers were grandfathered in and Congress capped annual increases at 18%, meaning that for some, it could still take 18 or 19 years before they are paying an accurate rate.
Burgess said the U.S. Senate has considered getting rid of the 18% cap, forcing homeowners to start paying the correct rates immediately, and potentially saving taxpayers over $20 billion.
The purpose of the FEMA cuts by the White House and Elon Musk’s Department of Government Efficiency is reportedly a way to pay for Trump’s desired tax cuts. Trump has also talked about eliminating FEMA altogether, which would leave the status of the NFIP uncertain.
Neptune’s Flood Research Group determined that around 95% of current NFIP policyholders would qualify for private flood insurance and that more than half would save money by switching to private policies.
Burgess noted that President Joe Biden supported legislation — which never came to a vote — that favored private insurance to “get the government out of the flood insurance business” due to financial losses and perceived inefficiencies. He added that the need for reform had bipartisan support.
Another issue that needs addressing, Burgess said, is the number of buildings that don’t have flood insurance. Out of approximately 25 million buildings in the United States — the vast majority residential — only about 4 million, or 16%, have flood insurance. And though Neptune has done well, reaching more than 200,000 customers in a relatively short amount of time, there is still a disconnect in convincing citizens to potentially pay $10,000, or more, for a policy, while the government’s program charges $500.
Often, Burgess lamented, there are cracks in the process when people buy homes, cracks that don’t reveal themselves until it’s too late.
“So many people, especially those that come from up north, come down here and pay cash for a house and no one’s even telling them they have to have flood insurance,” he said. “After Helene and Milton, I heard from so many people who said, ‘I didn’t realize I didn’t have flood insurance and now I’ve lost everything.’” Many, he said, naively believe their homeowner’s insurance includes flood coverage.