Insurance break for Cedar Rapids could mean big savings

The state insurance commissioner has told the federal government that the city of Cedar Rapids should get a break on the amount of flood insurance the federal government requires of the city because of the unreasonable cost of coverage in the wake of the city's June 2008 flood.

The request for a federal insurance waiver, if granted, should save the city significant money in the near term, Casey Drew, the city's finance director, said Tuesday.

In a letter dated Nov. 10 to President Barack Obama, Iowa Commissioner of Insurance Susan Voss notes that the federal Stafford Relief and Emergency Assistance Act “specifically provides” that the president shall not require more insurance than is deemed “reasonable” by the appropriate state insurance commissioner.

Voss certifies in her letter that flood insurance is “not reasonably” available to the city to allow it to afford to purchase all that otherwise would be required as part of the city's acceptance of disaster payments from the Federal Emergency Management Agency. Voss concludes that the city should purchase National Flood Insurance Program coverage for building and contents for every building that sustained flood damage in 2008, and she goes on to require a certain level of additional property insurance coverage, though it's unclear if the city already meets that standard or not.

On Tuesday, Drew reported that the city in April purchased $17.1 million in National Flood Insurance Program coverage on 46 buildings for $101,129.

Before that in April, City Manager Jim Prosser said one estimate given to the city was that it would require $960,000 a year to provide insurance just to the flood-damaged Veterans Memorial Building, which has been home to City Hall.

The near-$1-million annual insurance estimate on the Veterans Memorial Building is now the figure that the city has built into the cost comparison between operating a renovated Veterans Memorial Building with city offices versus building a new City Hall.

Drew on Tuesday said the insurance waiver supported by the insurance commissioner will mean that the city will face far less in flood insurance costs in the near term, though he said it was unclear what the insurance costs will be.

Drew noted that the insurance waiver, which was sought by the city, which he said is expected to be approved and which he called good news for the city, doesn't go on forever. It is reviewed periodically, he noted.

In her letter, Commissioner Voss states her certification remains in effect “until otherwise modified, altered or amended by this office.”

By way of comparison, in April, Mark Schultz, the city of Des Moines' risk manager, reported that city of Des Moines pays $30,000 a year for flood insurance and another $27,000 a year in additional insurance to help pay the deductibles on the flood insurance should it be needed. That level of insurance protection includes protection for Des Moines' high-flood-risk facilities like City Hall and its wastewater treatment plant, which were flooded in 1993, Schultz said then.