The Federal Emergency Management Agency is moving forward with the launch of a new flood insurance scoring system next week, dismissing last-minute calls from lawmakers and advocates to delay changes, a a senior agency official told E&E News yesterday.
David Maurstad, the FEMA head of the agency’s flood insurance program, said a new method of setting insurance premiums would go into effect as planned on October 1 despite lobbying from lawmakers insurers who say some voters will face higher insurance costs.
“There is no delay in drafting new policies under the 2.0 risk rating,” Maurstad said in an interview, referring to FEMA’s plan to restructure insurance rates to reflect more precisely the risk of flooding each property.
The restructuring plan will change the premiums of the 5 million policyholders who purchase flood coverage through FEMA’s National Flood Insurance Program (NFIP) and marks the largest overhaul of the program since its inception in 1968.
About 3.8 million policyholders will pay higher premiums while 1.2 million policyholders will see rate cuts from their policy renewal after Oct. 1, Maurstad said. The NFIP provides almost all of the country’s flood insurance.
” This is unheard of. Never before has the program reduced premiums because the way we did before didn’t allow it, ”said Maurstad. “These people have been paying too much for too long. It corrects this injustice.
The restructuring of FEMA has drawn opposition from some lawmakers in coastal states such as Louisiana, Texas and New Jersey, who have tried legislative and lobbying strategies to block or slow new insurance rates.
Thirty-eight House members, split evenly between Democrats and Republicans, urged House leaders in a letter last Thursday to use “any legislation submitted this month” to delay the 2.0 risk rating.
The “double-digit rate hikes” FEMA is planning for policyholders “are too much for them to bear,” said the letter, written by Reps Bill Pascrell Jr. (DN.J.) and Garret Graves (R- The.) .
But lawmakers received bad news yesterday when a spending bill released by House Democrats to fund the federal government through Dec. 3 provided only a temporary extension to the program.
“We hope implementation will begin on October 1,” said Laura Lightbody, director of the Flood Prepared Communities Initiative at Pew Charitable Trusts.
Pew and 15 other groups representing environmentalists, taxpayers and some insurers urged congressional leaders in a letter Friday to reject any delay in the 2.0 risk rating, saying the new insurance rates would deter development in prone areas. to flooding.
“Pricing risk in flood insurance is one of the clearest and easiest ways to communicate flood risk,” Lightbody said.
Graves submitted an amendment to the House spending bill yesterday to delay the 2.0 risk rating, but House leaders said they were keeping the amendments out of the bill.
Efforts to block the 2.0 risk rating through the spending bill could be resumed in the Senate, where Senator Bill Cassidy (R-La.) Spoke yesterday to urge President Biden to block FEMA .
“Congress never passed the bill requiring FEMA to implement this. President Biden can stop him, he alone is responsible, ”Cassidy said. “He should ask FEMA to delay implementation of the 2.0 risk rating. “
Insurance increases taking effect next week only apply to new policies underwritten under the NFIP. For people renewing their flood policies, rate increases will begin April 1.
That leaves lawmakers several months to work on legislation that would limit FEMA’s ability to increase insurance premiums.
“There are so many different vehicles going through Congress right now that I think there are still opportunities to mitigate some form of mitigating the impacts of Risk Score 2.0,” said Ileana Ledet, vice president principal of public policy at Greater New Orleans Inc., an economic development group opposed to the restructuring of FEMA.
Ledet said his group had tried to “get the word out as much as possible about the upcoming changes and encourage owners to educate themselves as quickly as possible.”
Several measures taken in Congress this year sought to restrict FEMA by saying the agency cannot increase any individual insurance premium by more than 9% in a single year. Federal law currently allows FEMA to increase individual premiums by up to 18% per year.
FEMA’s Maurstad said he “can’t really talk about legislation currently under consideration” and added that limiting annual premium increases to 9% “would give people more time to potentially reach their risk rating. full”.
FEMA’s goal in developing the 2.0 risk rating over the past four years is to gradually increase insurance premiums until each premium reaches the level at which it reflects a property’s risk and is “Currently healthy”.
Maurstad said policyholders with high-value homes would see their premiums rise, while those with homes with lower valuations would be more likely to see their rates drop.
While the biggest changes to flood premiums won’t happen until April, some people who buy flood coverage have already seen the effects of the 2.0 risk rating.
Graves and Rep. Steve Scalise (R-La.) Described in a recent letter to FEMA a Louisiana resident who learned that a new flood insurance policy would cost $ 5,531, or nearly 10 times the amount the policy would have cost before the 2.0 risk rating.
Maurstad said the price increase shows “how badly this property was valued under the old system where it did not take into account the unique characteristics of the property.”
“This illustrates the improvement made with the 2.0 risk rating by charging a risk-based premium. And that’s what insurance does, ”added Maurstad.
A version of this story also appears in Daily E&E.