Legislature(2025 - 2026)BELTZ 105 (TSBldg)
02/10/2025 01:30 PM Senate LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| SB73 | |
| SB11 | |
| SB17 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 73 | TELECONFERENCED | |
| *+ | SB 11 | TELECONFERENCED | |
| *+ | SB 17 | TELECONFERENCED | |
SB 11-FLOOD INSURANCE
2:11:38 PM
CHAIR BJORKMAN reconvened the meeting and announced the
consideration of SENATE BILL NO. 11. "An Act relating to flood
insurance; relating to property insurance; establishing the
Alaska Flood Authority and the Alaska flood insurance fund; and
providing for an effective date."
2:12:02 PM
SENATOR BERT STEDMAN, District A, Alaska State Legislature,
Juneau, Alaska, sponsor of SB 11. He stated that he is looking
to create a system to replace federal flood insurance. He said
this issue came up years ago when he noticed high premiums being
paid in his district with very few claims. He said over time his
office saw that the federal program not only provides limited
coverage of $250 thousand for homes and $500 thousand for
businesses but also imposes strict development rules on coastal
properties. He stated that despite repeated records requests, he
couldn't get data on premiums paid by Alaskans, so he added
language to the operating budget to require a state report. The
report showed most premiums went out with few claims in return,
and strict compliance rules made results worse with the
insurance company requiring a person to elevate or rebuild their
home if repairs exceed 50 percent of the home's value. He said
these rules are a fairness issue. Most people's biggest asset is
their home and being forced to tear their home down or jack
their home up because it's older or slightly too low in value
isn't fair. He stated that the system traps homeowners by
requiring flood insurance to qualify for loans in certain zones
and is enforced through banks and the secondary mortgage market.
2:17:55 PM
SENATOR STEDMAN said the federal flood insurance program
restricts coastal development by openly discouraging builds on
beaches, using pilings, or adding rock fill. That doesn't fit in
places like Juneau or Ketchikan, where most valuable property is
on the shoreline. He stated that his office started looking into
the Federal Emergency Management Agency (FEMA) program when his
office saw Alaskans paying high premiums with almost no claims.
He said the program is underfunded and uses the Alaskan people's
premiums to subsidize disasters in places like Florida, the
Carolinas, and the Gulf of Mexico(America). He stated that
Alaskans get limited coverage and face strict rebuilding
requirements if damaged often forcing people to elevate or
demolish homes. He said because flood insurance is required in
designated zones to get a mortgage, residents are forced into
the program through the banking system. He stated that his
office reached out to the Division of Insurance, which helped
show how unfair these premiums are and that private insurers
wouldn't be allowed to charge these rates in Alaska. He stated
that his office began drafting a bill to create a state
authority, not as a charity, but as a self-funded alternative.
Residents would pay regulated premiums, rising with losses and
falling when risk is low. He said the authority might need seed
funding, but that could be paid back.
2:23:47 PM
SENATOR STEDMAN stated that from 2008 to 2021, Kenai paid nearly
$3.7 million in premiums but had only $103,000 in claims. Sitka
paid $1.5 million and had just one $20,000 claim. He said that
the one claim was filed only because filing with the insurance
was easier than dealing with the city. Ketchikan paid $1.5
million and had $100,000 in claims. Fairbanks paid $11 million
and got back $1.7 million. Meanwhile, Federal Emergency
Management Agency (FEMA) recently added 1,100 more properties in
Ketchikan to the flood zone. He said SB 11 would create an
Alaska based flood insurance authority. SB 11 would raise
coverage limits from $250 thousand to $1 million for residential
and from $500 thousand to $2 million for commercial properties
which is more in line with coastal property values. He said SB
11 also avoids many of FEMA's development restrictions and uses
a broader definition of flood. He stated that as FEMA expands
coverage and takes in more land, it's clear the state needs a
better solution for Alaskans.
2:27:51 PM
SENATOR STEDMAN stated that the Mendenhall River in Juneau and
Ketchikan Creek are known flood areas, with some losses over the
decades. Mendenhall Valley is becoming more at risk due to
glacial changes, and FEMA may soon impose strict requirements on
homeowners there. He said the goal is to create an authority
that raises coverage, lowers premiums, and removes unnecessary
restrictions allowing local planning authorities to manage
zoning. No one's asking for a free ride, just a fair system. He
stated that if any planning authority starts approving permits
below the tideline, they likely won't last long.
2:29:36 PM
SENATOR MERRICK asked if there were any analyses on earthquake
insurance.
2:29:46 PM
SENATOR STEDMAN answered that SB 11 is focused on floods but
issues like earthquakes, landslides, and mudslides could be
addressed later. He said SB 11 could be a phased approach by
getting the core structure in place, then expand it.
2:30:42 PM
SENATOR DUNBAR asked if a home is in a designated flood zone the
federal government requires the homeowner to have flood
insurance but not necessarily the federal governments insurance.
2:31:05 PM
SENATOR STEDMAN answered that's his understanding.
SENATOR DUNBAR said with the numbers clearly showing homeowners
are overpaying and opens doors for an entrepreneur to come in to
offer better rates and make a profit. He asked why the free
market isn't offering this product and why shouldn't the state
allow the free market to displace the federal government.
SENATOR STEDMAN answered the restrictions from the federal
government would still be in place, unless the legislature
passes SB 11 to remove those restrictions. He stated that the
Division of Insurance is better suited to answer questions about
private flood insurers but added that Alaska's small population
makes it difficult to attract insurance carriers. He stated that
if the state shuts down coastal development, the communities
risk job loss and the states development.
SENATOR DUNBAR stated that the federal government requires
[coastal homeowners] carry some kind of insurance that state law
cant override unless its specifically allowed. He asked how SB
11 would remove federal development restrictions and wouldn't
those restrictions still apply even with state or private
insurance.
SENATOR STEDMAN answered the whole goal of SB 11 is to get rid
of the restrictions.
SENATOR DUNBAR asked if the restrictions and development are
built into the policies or do they exist in some other
regulation.
SENATOR STEDMAN answered that the restrictions are coming
through FEMA, and the goal is to get rid of the whole federal
environment and have the state offer policies to get out from
the high premiums.
2:34:32 PM
ROSE FOLEY, Staff, Senator Bert Stedman, Alaska State
Legislature, Juneau, Alaska, read the sectional analysis on SB
11 as follows:
[Original punctuation provided.]
Sectional Analysis
Senate Bill 11 version A
Section 1: Requires insurance rates for flood
insurance be based primarily on actual
historical flood and damage data.
Section 2: Provides a definition of "flood".
Section 3: Adds a new Article 2 to AS 21.60 creating
the Alaska Flood Authority.
Sec. 21.60.100 Creates the Alaska Flood
Authority (authority) as a nonprofit entity
and requires all insurers licensed to
provide property insurance in Alaska to
maintain membership in the authority and to
provide all information required by the
board or director.
Sec. 21.60.110 Defines membership on the
board of the authority and requires an
annual report by September 1 of each year
detailing the effectiveness of the
operations of the authority; the benefits
of the insurance program; and identifies
penalties or sanctions imposed on the state
under the National Flood Insurance Act.
Sec. 21.60.120 Establishes the powers of
the authority. Sec.
21.60.130 Outlines the required facets of
the plan of operation for the authority, to
be submitted to the director of the
division of insurance.
Sec. 21.60.140 Exempts the authority from
AS 44.62 (Administrative Procedures Act).
2:36:11 PM
MS. FOLEY continued with the sectional analysis for SB 11:
Sec. 21.60.150 Exempts the authority from
any real and personal property taxes.
Sec. 21.60.160 Requires the authority to
make at least one plan available to a
person who is eligible for coverage and
prohibits refusal by the authority to offer
coverage to a qualified person.
Sec. 21.60.170 Provides that the policies
offered by the authority shall be at least
equivalent to those offered by the National
Flood Insurance Program. Specifies coverage
limits of authority plans.
Sec. 21.60.180 Requires premiums to be
fair, and to be based primarily on actual
historical flood damage data.
Sec. 21.60.190 Outlines the duties of the
authority. These include performing the
administrative and claims payment functions
of this act, and providing the director of
insurance a semiannual report of the plan
of operation.
Sec. 21.60.200 Details funding for the
authority and the insurance program. Each
member will pay dues in an amount
determined by the board and share in any
losses of the insurance program.
Additionally, the board will make an annual
determination whether a fiscal year end
assessment is necessary to operate the
program and issue the assessment if needed.
This section also allows for a legislative
appropriation of up to $5 million to
satisfy a claim if the member assessments
are insufficient.
Sec. 21.60.210 Defines eligibility for
state flood insurance as any person with an
insurable interest in insurable property.
This section allows the board, with the
approval of the director of the division of
insurance, to create additional eligibility
requirements.
2:38:03 PM
MS. FOLEY continued with the sectional analysis of SB 11:
Sec. 21.60.220 Outlines how an eligible
person enrolls in a state insurance plan.
Sec. 21.60.230 Provides the authority 30
days after receiving an application to
notify the applicant if the application has
been accepted or rejected.
Sec. 21.60.240 Stipulates that insurance
coverage begins immediately upon receipt of
the first premium.
Sec. 21.60.250 Requires the authority to
notify people who live in flood zones of
the state insurance plan. Requires an
insurance provider that denies a flood
insurance application to notify the
applicant of the state insurance plan and
application process.
Sec. 21.60.260 Instructs the director of
the division of insurance to formulate
general policy and adopt regulations
necessary to administer the state flood
insurance plan.
Sec. 21.60.270 Clarifies the state is not
liable for acts or omissions of the
authority. Sec. 21.60.280 Exempts board
members from civil and criminal liability
for an act or omission if that act or
omission was done in good faith and within
the scope of duties.
Sec. 21.60.290 Creates the Alaska Flood
Insurance Fund as a separate fund in the
state treasury and establishes a framework
for use of the Fund.
2:39:35 PM
MS. FOLEY continued with the sectional analysis of SB 11:
Sec. 21.60.300 Provides definitions for the
Alaska Flood Authority.
Section 4: Stipulates that assessments and civil
penalties collected by the Alaska Flood
Authority are defined as program receipts
that are accounted for separately, and that
appropriations of these funds are not made
from the unrestricted general fund.
Section 5: Clarifies the Section 1 applies only to
insurance policies or contracts entered
into or renewed on or after the effective
date of this legislation.
Section 6: Allows the director of the division of
insurance to adopt regulations to carry out
this act if the Alaska Flood Authority
fails to submit a plan of operation by
January 1, 2027.
Section 7: Establishes an effective date of July 1,
2026.
2:41:03 PM
CHAIR BJORKMAN held SB 11 in committee.