Coastal cities to see insurance rate hike

Commercial real estate properties in New Orleans will receive flood insurance rate increases.

Cities on the coast, as well as cities with a high probability of flooding, will see increases in flood insurance rates, which can affect commercial property managers in many areas.

The increase is due to the Biggert-Waters Flood Insurance Reform Act of 2012, which will hike flood insurance rates 25 percent annually for commercial real estate properties in coastal cities. This figure is expected to increase until a level is reached where the cost of providing insurance is at the same plane as overall coverage.

New Orleans is one of the cities that will be affected by the law, which extends the National Flood Insurance Program through late 2017.

"It's expensive, but it's going to happen to every coastal city in the United States," Wade Ragas, New Orleans real estate consultant, told It's not like it's just happening in New Orleans. And it's going to happen on the Northshore."

Despite some property management companies being affected by insurance hikes, many investors are getting more involved in the market. The level of outstanding debt for commercial properties rose nearly $22 billion during the final three months of 2012, according to a report from the Mortgage Bankers Association. This was close to 1 percent improved from the previous quarter.

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