Menendez seeks to halt flood rate hikes Flood insurance rates begin to go up under new FEMA rules; Menendez seeks delay

Flood insurance rates are set to increase for most policyholders this year, with new policyholders facing new rates starting Friday, and Sen. Bob Menendez, D-N.J., is warning the federal program may be pricing itself out of existence.

He and Sen. Bill Cassidy, R-La., say the new rates will push people out of the program over time, leaving only the most flood-prone properties covered. The lawmakers held a news conference Thursday calling for a delay in implementation of the new rates.

"I support revamping the flood insurance system to include the most sophisticated data, including on climate change," Menendez said. "But Risk Rating 2.0 as it stands needs to be delayed. It has yet to be fully explained to agents in coastal communities."

"They are increasing rates higher than I think is sustainable for the homeowner and higher than sustainable therefore for the program," Cassidy said. "The administration has the power to delay this. My personal plea is to the president to tell FEMA not to proceed, but to look for alternatives."

There is a statutory cap of 18% per year premium increases, Cassidy said, but the effect is made larger by compounding.

Cassidy and Menendez are proposing instead a reform package that would cap rate increases at 9%.

"It would also increase mitigation (such as elevating structures) and remove properties prone to repeated flooding," Cassidy said. "The goal is to slow increases and simultaneously have more dollars available for mitigation. That keeps people in the program and keeps the program solvent."

The Federal Emergency Management Agency, which runs the National Flood Insurance Program, has said its new rating structure will be fairer and more science based. Property owners will pay for coverage based on their specific location's risk of flooding and cost of repair.

Most New Jerseyans covered by the program can expect to see their premium costs increase by up to $120 in the next year, while 21% will see their premiums go down, according to FEMA. About 5% will see increases of more than $240 per year, especially in the most flood-prone shore areas.

First to be affected are new policyholders. Existing policyholders will see the new rates start in April 2022.

Nationally, the average flood insurance premium is $700 per year, according to FEMA.

FEMA has said its Risk Rating 2.0 system "delivers rates that more accurately reflect flood risk and ensure the National Flood Insurance Program will be here for this generation and generations to come."

But Menendez and Cassidy say the increases are too much, too soon.

An analysis by the Congressional Budget Office that has not been released but that the senators said was provided to them verbally, predicted that 900,000 flood insurance policyholders would drop out of the program as a result of rate increases over the next 10 years.

"That's 20% of the entire program," Menendez said. "That runs completely opposite of FEMA's goal (of increasing participation)."

The NFIP is more than $20 billion in debt, according to the Congressional Research Service, and Congress has not been able to come up with a comprehensive revamping of the program through legislation.

The nonprofit Pew Charitable Trusts has said the new rating system is fairer and uses industry flood data, best practices and catastrophic modeling to set rates.

It also encourages flood mitigation by offering lower premiums in exchange for risk reduction actions, such as elevating utilities, Pew said.

"In a world with growing risks, this is a welcome - and timely - change," Pew said in its analysis. "Without Risk Rating 2.0, every NFIP policyholder would get a rate increase this year. Under the new, more equitable plan, nearly 1.2 million of the more than 5 million NFIP policyholders will see an immediate decrease in premiums. ... Of the single-family homeowners who will see costs rise, nearly 88% will face a modest increase of $10 or less per month.

In New Jersey, according to FEMA, 21% of covered New Jerseyans will see premium decreases under the new system, 64% will see increases of up to $120 a year, 10% will see increases of $120 to $240, and 5% will see premiums go up by more than $240 a year.

According to FEMA, there are 217,200 flood insurance policies in New Jersey, and the average payout over the past 10 years has been $47,700.

REPORTER: Michelle Brunetti [email protected]