Flood insurance costs are rising. Florida keeps paying, other states drop it

In spite of rising costs, Floridians aren’t ditching their flood insurance policies, a new study found. But the rest of the nation is dropping flood policies at a rate that could endanger the federal program that provides them.

The study, published Tuesday in the Journal of Catastrophe Risk and Resilience, suggests that in the last few years, hundreds of thousands of Americans have dropped their flood insurance policies or declined to sign up for a new one after the federal government hiked rates nationwide. And, perhaps unsurprisingly, the people most likely to drop their insurance policies were poorer folks facing the highest price hikes.

“We’re finding that in households where the income is on the lower side, the drop off in policies is even higher,” said Jesse Gourevitch, an economist with the Environmental Defense Fund and lead author of the study.

The new pricing strategy — called Risk Rating 2.0 — was designed to help the National Flood Insurance Program dig itself out of billions of dollars in debt after decades of cheaply insuring homes that tend to flood a lot.

So far, experts say, it’s working as advertised to raise prices for the most flood-prone spots and lower them in less risky areas, but some of those wins are clearly offset by the plummeting numbers of policyholders across the county. The study found an up to 39 percent decrease in new policies and a 13 percent decline in existing policies in just four years.

That’s bad news for the program, which is in $22 billion of debt, plus faces rising costs to insure flood prone homes as climate change raises sea levels and intensifies rainstorms. Rather than permanently fix the NFIP, Congress has instead issued short-term authorizations (34 of them) that keep the program going as-is for just a little bit longer.

The fate of the beleaguered program is crucial for Florida, which has a third of the federal government’s NFIP policies, more than any other state. It’s a load bearing part of hurricane recovery, too. By one analysis from the Florida Policy Institute, NFIP payouts to Floridians with flooded properties made up 50 percent of disaster aid the state got from the federal government last year.

Several bipartisan bills have been introduced in the senate and house to address critical flaws in the program, and the president’s FEMA review council is expected to release a draft report soon that proposes some potential solutions.

“This is an issue that has really broad impacts and it’s not getting better,” said Joanna Slaney, vice president for political and government affairs at EDF, which released a new policy platform of ideas to fix the NFIP on Tuesday.

“It’s really important that we tackle it and we not have these temporary extensions, that we really figure out how to shore up this program and improve it for homeowners.”

To make Risk Rating 2.0 — the biggest change to the NFIP in decades — work as planned, FEMA needed two things: more people to sign up for flood insurance and for prices to rise in places with high risk.

Instead, it appears the change in pricing has led hundreds of thousands to drop their flood insurance. The new study reflects similar findings by the Coalition for Sustainable Flood Institute, which found nearly 300,000 fewer NFIP policies nationwide since the RR 2.0 rollout.

This was especially pronounced in flood-prone states like Louisiana, which saw an 18 percent drop, or Texas, where 188,000 people (or 24 percent) dropped their flood insurance policies in the last four years, according to FEMA data analyzed by CSFI.

But Florida, data show, is actually headed in the opposite direction. Since the new prices were rolled out in 2021, Florida has added nearly 100,000 NFIP policies, about a 6 percent growth.

Peter Waggonner, co-lead of CSFI and senior policy advisor for Greater New Orleans, Inc, attributes that growth to the state’s new policy of mandating that anyone with home insurance from Citizens, the state-run insurer of last resort, to also hold flood insurance — regardless of whether they’re in a flood zone or not.

Under Risk Rating 2.0, about 20 percent of Floridians saw their flood insurance premiums decrease, 68 percent say an increase of under $120 a year, 8 percent saw increases of $120 to $240 a year and 4 percent saw increases of over $240 a year.

Despite Florida’s bucking of the trend, a positive step for the soggy state, Florida joined Louisiana and eight other states in suing the federal government over its rollout of Risk Rating 2.0 in 2023, saying the new pricing plan “defies both law and logic.”

Florida needs cheaper flood insurance, then-State Attorney General Ashley Moody argued in her statement. And Risk Rating 2.0 wasn’t helping.

Experts like Talley Burley, the senior manager for climate risk and insurance at EDF, agree that affordability should be a bigger focus for NFIP. One of the top suggestions in EDF’s new policy platform is for greater subsidies for low-income homeowners in the most flood-prone neighborhoods, to help them afford crucial flood insurance.

“We do need to make sure that people who need the resource the most can afford it,” she said. “The people who need insurance the most are the people who are paycheck-to-paycheck.”

While rising premiums might have scared tens of thousands of people away from federal flood insurance policies, data show it could also have encouraged some to turn to the growing private flood insurance market.

The number of private flood policies nationwide basically doubled from 277,000 policies in 2020 to about 569,000 by 2024, according to Fitch.

In Florida, the Office of Insurance Regulation tracked a 6 percent increase in statewide private flood premiums from 2023 to 2024 alone. And that’s on top of a 26 percent increase in federal flood insurance premiums from the same time period.

In some places, private flood insurance is even cheaper than federal flood insurance; especially in low-risk areas. That’s both good news for homeowners and a potential issue for the NFIP, Waggonner said.

More private companies willing to insure flood risk is a great thing, he said, but if they snap up all the properties with low flood risk and low premiums, leaving all the high risk properties to NFIP, that could be an issue. It could make it harder for NFIP to even find its financial footing.

Or, if Congress decides to follow the call of some politicians — including the authors of the Project 2025 policy playbook that President Donald Trump’s administration has been following — and privatize the flood insurance market entirely, that could spell trouble.

“That could lead us to the same place the country found itself in the 1960s, where private flood was determined to be too risky to write. There was a complete drawback of the private market,” Waggonner said.

“We really should not let history repeat itself,” he said. “We should try to write legislation that writes a new history that really, really provides proper flood insurance coverage for our country.”

In Florida, 1.7 million people depend on the federal government for their flood insurance, which is required when trying to buy a home in a flood zone with a federally backed mortgage.

Experts say that requirement makes it easier for people to recover after a hurricane or rainstorm deluges their home, but it also can frustrate one of Florida’s most important industries — real estate.

During the recent government shutdown, the NFIP was frozen. Realtors couldn’t get new flood insurance policies for their clients, stalling closings and sales. The National Association of Realtors said up to 50,000 homes across the county sold without flood insurance in the 43 days the government was shut down.

READ MORE: Government shutdown threatens to freeze some Florida home sales, Realtors warn

And the latest agreement to re-open the government is set to expire on Jan. 30, so the market could re-freeze in about a month unless Congress acts.

Slaney, with EDF, said that the impact to the real estate market was eye-opening to many legislators she talked to. Now, she said, they seem more open to the idea of coming up way to keep the NFIP running even when the government shuts down, like the post office.

Waggonner said the latest government shut down should be “a wake-up call for Congress.”

“The program absolutely needs to be reformed, but first it must have a few years of runway so we know it will exist,” he said.

©2025 Miami Herald. Visit miamiherald.com. Distributed by Tribune Content Agency, LLC.