Homeowners in the most flood-prone areas of the country are facing huge increases in the price of flood insurance that could result in hundreds of thousands of people canceling their policies and risking financial ruin if their homes flood.
The Federal Emergency Management Agency, which operates the United States’ largest flood insurance program, recently released projections showing that its premiums are expected to increase by thousands of dollars a year in some areas.
The projections are the most detailed analysis FEMA has produced since it embarked on an ambitious overhaul of its national flood insurance program a few years ago.
In Plaquemines Parish on the Louisiana coast, the average flood insurance premium is expected to rise 545 percent — from $842 to $5,431, FEMA data shows.
In Collier County, Florida, where Hurricane Ian originated, homeowners pay an average of nearly $4,000 for FEMA flood insurance. The average premium in the county on Florida’s southwest coast is currently $1,053.
Average premiums will more than double in 800 of 3,000 counties, according to an E&E News analysis of FEMA data.
The increase will be particularly strong on the coasts of Florida and Louisiana, where people can also expect enormous increases in home insurance premiums. Flood insurance is sold separately from homeowner’s insurance, and FEMA sells 90 percent of the nation’s flood insurance through its NFIP.
FEMA’s price increases follow the agency’s decision in the 2010s to restructure the NFIP so that each premium more accurately reflects each property’s risk of flooding and eliminate some discounts.
Dubbed Risk Rating 2.0, the restructuring will last more than a decade as rate increases are phased in each year until each policyholder pays a premium that reflects the full flood risk of their home or business.
The new tariffs took effect in 2021 — prompting protests from some lawmakers — and are part of a larger effort by FEMA to educate the public about the growing threat of climate change.
“All of this I think has a significant impact on people not only across the country but also in their neighborhoods becoming more aware of their flood risk, and that’s a good thing,” said David Maurstad, a senior FEMA official who Flood insurance program is responsible for the flooding, said in an interview on Tuesday.
“The country is at risk due to increasing climate change and increased development in risk areas,” Maurstad added, “and there is a better understanding of that and how we can all work together as a community to mitigate the flood risk this country is facing to ignore.” Year after year.”
Carolyn Kousky, associate vice president for business and policy at the Environmental Defense Fund, said rate increases could end up being even higher than FEMA projections based on current flood risk.
“In light of climate change, we can expect a further increase in risk in some places in the country. And rising risk means rising rates,” said Kousky, one of the country’s leading experts on flood insurance.
The insurance projections could help officials target the areas most at risk of flood damage to build resilience to flooding and climate change, Kousky added.
Due to a federal law that says FEMA cannot increase individual premiums by more than 18 percent per year, rate increases will be phased. That means some homeowners’ premiums will rise 18 percent every year for more than a decade.
Maurstad said it’s not surprising that rates would increase significantly on the Florida and Louisiana coasts “because the risk is higher there.”
Louisiana residents recovered about $20 billion in claims from the NFIP — the bulk of it after Hurricane Katrina in 2005. But they paid less than $6 billion in awards, Maurstad said.
New data released by FEMA shows how much the average NFIP premium for single-family homeowners in each state, county and zip code will increase by the time the restructuring program is completed.
Nationally, the average premium for single-family homeowners is expected to double from $888 to $1,808.
The average premium is expected to increase in every county and in each of the nearly 24,000 zip codes across the country.
Despite the averages, Maurstad said 1 million of the 4.7 million NFIP policyholders will see their premiums fall — by an average of $85 — as a result of the restructuring.
These policyholders are more likely to keep their policy than if we had asked them to pay more than their fair rate, Maurstad said. He also said that many of the premium increases would have happened even if FEMA hadn’t restructured the insurance program.
FEMA’s disclosure of planned rate hikes will likely increase pressure on Congress to take action to mitigate the sticker shock.
New Jersey Rep. Frank Pallone, the senior Democrat on the House Energy and Commerce Committee, announced on May 2 that he plans to introduce legislation to “reform the entire national flood insurance program.”
Pallone said his bill would “create new affordability measures” and further limit the amount FEMA can increase premiums in a single year. New Jersey residents have told Pallone that FEMA flood insurance is “now prohibitive.”
FEMA and Congressional Democrats have been trying for years to create a subsidy program to help lower-income households pay for flood insurance. But Republican lawmakers have opposed it.
FEMA’s Maurstad said he’s optimistic Congress will pass a subsidy program that he says is “a game changer.”
“I speak to the members and there is a consensus that something needs to be done,” Maurstad said. “It’s about deciding how we’re going to address the affordability issue, not whether we’re going to address the affordability issue.”
EDF’s Kousky said the projected rate hikes “underscore the need for one.” [subsidy] program” because “lower-income households in high-risk areas simply cannot afford the cost.”
At a House Homeland Security Committee hearing on April 18, lawmakers warned Homeland Security Secretary Alejandro Mayorkas that increased NFIP premiums would force some low-income homeowners to sell their homes or forgo flood insurance.
Mayorkas replied: “We are reviewing and must continue to review the Risk Rating 2.0 given the concerns expressed therein and I can assure you that we are doing so and will report back on our findings.”
Maurstad said the department that oversees FEMA supports the restructuring program.
“I spoke to the secretariat and they didn’t doubt their support for Risk Rating 2.0 one bit,” said Maurstad.