Locals begin to see flood insurance rate hikes

A new federal flood insurance rate program that will drastically increase rates for some Florida Keys property owners goes into effect this month for existing policyholders.

The program, called Risk Rating 2.0, went into effect for new policyholders last October, but goes into effect for existing holders this month.

Homeowners throughout Monroe County could see National Flood Insurance Program (NFIP) policy rate increases from $100 to $9,000 annually — with an average increase of $3,200 — under the Federal Emergency Management Agency’s proposed Risk Rating 2.0 plan, according to an analysis by the grassroots insurance watchdog group Fair Insurance Rates in Monroe.

FIRM’s database showed Monroe County policyholders could expect increases averaging $3,200 annually. FIRM’s rate analysis is thousands of dollars higher than FEMA’s projected increases and contradicts them sharply.

“Rate increases of this size will be devastating to the economies of coastal communities, like Monroe County, and the increases could force homeowners to drop coverage, an action that would then compel the lender to force-place flood coverage, or even worse, lose their homes, “ said Mel Montagne, president of FIRM.

FEMA has said rates should increase about $240 annually for almost 93% of Monroe County policyholders.

While FEMA contends Risk Rating 2.0 will provide more accurate and transparent flood insurance pricing, this untested proposal is actually a huge, unregulated rate increase causing millions of flood policy holders to face extremely significant premium increases, Montagne said.

FIRM raised concerns that FEMA did not take into account important data such as property elevation certificates, which FIRM and the Monroe County government have been pushing for years. Having an elevation certificate could allow the owner to have a better rate under Risk Rating 2.0.

FIRM developed its database using privacy-coded Monroe County residences, both with and without elevation certificates. The database includes 48 single-family homes and condos, which are classified as commercial.

The properties were run through the new FEMA Risk Rating 2.0 software to calculate the new and significantly higher premium rates. After two years of delays, FEMA plans to implement Risk Rating 2.0 on Oct. 1 for new customers and April 1, 2022, for all flood policy renewals.

FEMA has said 92.9% of Monroe County properties, 87.6% of Florida properties and 84.1% of policyholders nationwide will see annual increases of $240 a year or less under the new program.

The new rating system will no longer use flood maps and zones or base flood elevations to determine a homeowner’s premium rate. It will use a series of models that could fundamentally change a property’s individual flood risk assessment and therefore its insurance premium, according to FIRM.

There will no longer be Preferred Risk Policies — those for properties in the so-called X zone— but existing PRP properties will be grandfathered in until they reach the full actuarial rate.

Data such as first-floor elevation, replacement cost value, construction type, foundation type and more are determined by FEMA’s undisclosed internal data sets rather than elevation certificates, and FEMA has no guidelines for appealing the information that its tools have provided, according to FIRM.

FEMA has offered very little transparency or explanation as to how the new flood insurance rate methodology will work, according to Montagne.

The details of FEMA’s Risk Rating 2.0 are opaque, limited and confusing, according to Montagne. The rates and FEMA’s lack of transparency on how rates are calculated have begun to spark a massive outcry in the Florida Keys.

FIRM has begun to hear from new policyholders and expects to soon hear from existing holders, said Caroline Horn, FIRM manager.

Last fall, FIRM joined other concerned organizations like the Coalition for Sustainable Flood Insurance based in Louisiana in encouraging FEMA to delay the implementation of Risk Rating 2.0 until both methodology and rate structure effects are more thoroughly reviewed.

On Sept. 14, U.S. Congressman and Republican Whip Steve Scalise and Congressman Garret Graves, both of Louisiana, wrote a letter to FEMA Administrator Deanne Criswell requesting FEMA to delay the implementation of the new rating system. They pointed to Louisiana properties that would increase 600% to 1,000% under Risk Rating 2.0, according to FIRM.

“It would be devastating for FEMA to implement Risk Rating 2.0 and cause NFIP rates to skyrocket for some policyholders who play by the rules,” wrote Scalise. “We must continue working to implement long-term reforms to NFIP to ensure the program remains affordable and stable for the future.”

More information on Risk Rating 2.0 and FIRMS efforts can be found at firmkeys.org.

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