Our take: For flood insurance, rate hikes bring more risk to Louisiana

The National Flood Insurance Program is not a private company. It was created under the Federal Emergency Management Agency when commercial insurers stopped making flood insurance.

But the government program wants to charge higher premiums to cover potential losses, and argues that’s what private sector actuaries do.

We are not alone in wondering whether FEMA understands the mission of its program and the nature of flood risk.

Just ask Steve Scalise, the second-largest Republican in the U.S. House of Representatives. He convened a meeting with the New Orleans area parishioners to talk about his NFIP’s new “Risk Rating 2.0” program, which is likely to significantly increase insurance premiums in southern Louisiana.

Scalise argued that the program exhibited a “lack of transparency” in the development of new rate hikes, but could point to certain issues that the authorities had not addressed. , admits that it accounts for only a fraction of the national embankment accounted for in its rating algorithm, even though it should lower risk.

The goal of the new system is to assess each home’s flood risk rather than using the old method, which was primarily based on FEMA’s flood maps. Many argued they weren’t perfect, but at least they were clear enough for homeowners, businesses, and parish leaders to understand.

Various factors such as reconstruction costs, distance to water, and elevation are now factored into complex algorithms that calculate insurance premiums.

FEMA defends its approach, saying it’s fairer to all, and scraps a system where old, modest homes essentially subsidize the premiums of newer, more expensive beachfront homes. To do.

Breaking news to NFIP: Louisiana does not have thousands of seaside palaces.

FEMA has released limited data on growth, providing only figures for the first year under the new system. Congress has capped rate hikes to no more than 18% per annum, thanks to the efforts of Louisiana delegations including Scalise. This has the effect of masking the overall impact of a risk rating of 2.0. Annual increases will continue, sometimes dramatically over time, until homeowners reach their “target” rate under the new system.

TIMES-PICAYUNE | The Advocate obtained FEMA’s “full risk premium” forecast through a request for public records. They show that Louisiana homeowners end up seeing, on average, a 122% increase under a risk rating of 2.0, which is phased in over multiple years.

As a coastal state, Louisiana’s interest in this program is not academic. Our homes and small businesses need insurance. The private market may warrant huge facilities through special arrangements like Gulf Coast resorts and petrochemical plants. But those options aren’t available — remember the history lesson why the NFIP was created in the first place — to insure the vast population of coastal Louisiana residents.

Again, there aren’t many beaches here worth mentioning.

Already, there are signs that the new premiums are depressing subscribers. Jefferson Parish President Cynthia Lee Shen said on Monday that about 3,000 homeowners in her parish have been affected since renewal began in April. said he was told he had canceled his flood insurance.

If this trend continues, the NFIP may reduce its actuarial exposure, but at the expense of premiums. And homeowners can be exposed to devastating consequences.

It’s a situation the program was created to avoid.

Leave a Comment