Flood insurance was about to get a whole lot more expensive, but that’s been delayed

Nov. 9--Floridians have another year of reprieve before they face a likely hike in their flood insurance premiums, thanks to political pressure from Congress over a potentially drastic revamp to the National Flood Insurance Program.

The planned change to the way the NFIP charges policyholders is meant to claw the program out of its multibillion-dollar debts and help the nation adapt to the growing risk of climate change -- in exchange for an end to the subsidies coastal residents have relied on for decades.

No state would face a bigger financial impact than Florida, where 35 percent of the program's policies are written.

A week after dozens of members of Congress worried about skyrocketing rates for their constituents pushed the Federal Emergency Management Agency to defer its planned rate restructuring -- known as Risk Rating 2.0 -- the agency announced it would enact the new rates in October 2021 instead of October 2020.

"Some additional time is required to conduct a comprehensive analysis of the proposed rating structure so as to protect policyholders and minimize any unintentional negative effects of the transition," the agency said in a statement. The delay also allows FEMA to switch everyone's rates at once instead of in phases, as originally planned.

The agency originally planned to release its new rate structure in April 2020, so it's unclear exactly how much higher rates will get. Last week, FEMA announced that renewal premiums will increase an average of 11.3 percent nationwide, and that's without the impact of the revamped rates.

Risk Rating 2.0 is the NFIP's big plan to get itself back in financial shape. The organization is deeply in debt after decades of expensive back-to-back natural disasters and inaccurate pricing for many coastal homes left the NFIP paying out more than consumers paid in.

Coastal residents, in particular, enjoy flood insurance policies that are cheaper than they should be thanks to the organization's outdated risk modeling, which doesn't take sea level rise or tidal flooding into account. But that modeling, along with FEMA's outdated and inaccurate mapping, have led people across the country to believe their homes are safe from flooding when they really aren't.

"People for 40 years were led to believe that FEMA flood maps were the gospel on their flood risk," said Albert Slap, president of Florida-based Coastal Risk Consulting. "People have been wiped out as a result of following FEMA flood maps."

He cites the example of Hurricane Harvey, which flooded more than 200,000 homes in Houston, Texas. Three-quarters of those homes were in a FEMA flood zone where flood insurance isn't mandatory, he said, so most of them didn't have flood insurance.

Slap agrees with former NFIP Head Roy Wright, who said last year that everyone with a Florida driver's license should have flood insurance.

The last time the NFIP changed its rate structure to reflect the real risk of flooding, the results were disastrous for homeowners. Premiums increased tenfold in places like the Keys, and the changes were walked back two years later.

Rep. Debbie Mucarsel-Powell, D-Miami, said she hopes the yearlong delay will give FEMA more time to determine optimal flood insurance rates that will not dramatically increase costs for residents and businesses in Florida.

"I support FEMA's decision to defer implementation of Risk Rating 2.0 for an additional year," Mucarsel-Powell, who represents the low-lying Florida Keys, said in a statement. "I urge FEMA to use this extra time to protect policyholders and conduct a comprehensive analysis of the program. I hope this delay will result in greater clarity and transparency from FEMA in the future. Homeowners and businesses deserve more information regarding any significant changes in their flood insurance premiums."

Six of the seven House members from Miami-Dade and Broward counties signed on to a letter urging a long-term flood insurance fix from FEMA in lieu of raising flood insurance rates around Election Day 2020. Rep. Frederica Wilson, D-Miami Gardens, was the only lawmaker from South Florida who didn't sign the letter. Fifteen of Florida's 27 House members, including Democrats like Broward Rep. Debbie Wasserman Schultz and Republicans like Panhandle Rep. Matt Gaetz, signed the letter.

Florida Reps. Francis Rooney, R-Naples; Charlie Crist, D-St. Petersburg; and Mucarsel-Powell also issued a joint statement praising FEMA's decision but said the agency should not issue a double-digit rate increase to flood insurance premiums.

"We're encouraged that FEMA is listening to Congress's concerns about the impacts of Risk Rating 2.0," the lawmakers said. "FEMA's promise to protect policyholders and minimize any unintentional negative effects in the transition is vital to ensuring the NFIP remains successful. We hope FEMA will more actively engage with Congress to ensure transparency around the fundamental changes they have proposed.

"We led the call for a lower premium cap and delay of Risk Rating 2.0 because our constituents cannot suffer a double-digit rate increase. While this temporary reprieve should prevent rate shocks next year, it does not change that premium hikes are on the horizon. We remain committed to our goal of preventing premium spikes and making the NFIP more affordable. A long-term reauthorization is an opportunity to increase the affordability, sustainability and usability of the program and we must get it right."

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