Our Views: FEMA's case for costlier flood insurance doesn't hold water

For months, the Federal Emergency Management Agency has slow-walked details about dramatic increases in flood insurance premiums, but now we know the whole truth — and it's ugly.

For an average Louisiana homeowner, rates will climb by 122% over several years, according to data obtained through a public records request by Mike Smith, a reporter for The Times-Picayune | The Advocate.

The premiums will only climb by 18% a year, and FEMA, which runs the flood insurance program, was playing hide-the-ball by withholding figures on the full impact of the increases over time.

That's bad news for current homeowners, but the hit is worse for new policyholders, since for them the new rates will take effect immediately. Larry Kornman, head of local homebuilder Sunrise Homes, said his firm was seeing policies jump from $650 per year to around $3,500 for houses in the $250,000 to $500,000 price range.

FEMA says the projected premium for an average single-family home in Louisiana will climb from $766 to about $1,700. But for residents of more vulnerable areas, the impact would be even greater.

Washington has been trying to increase flood insurance rates since Hurricane Katrina essentially bankrupted the federal program, which dates back to 1968. The latest scheme, called Risk Rating 2.0, will bring higher rates for most and decreases for some. It could reshape the housing market in south Louisiana, where flood insurance participation is greater than in any other region.

And the changes come at a bad time for homeowners.

Many are facing jaw-dropping increases for homeowners' coverage, as insurers cope with losses from the 2020 and 2021 hurricane seasons, which devastated Lake Charles and then communities in southeast Louisiana. A plague of insurer bankruptcies and withdrawals has forced many homeowners to turn to the state-run insurer of last resort, which by law charges higher rates than private providers.

And then there are increases in mortgage rates, prompted by the worst inflation in four decades, which also depress home values.

Last month, Homeland Security Secretary Alejandro Mayorkas visited New Orleans and defended the Risk Rating 2.0 system.

"The rating system has a very strong foundation, and one of principle, which is the principle of equity … that the insurance that is distributed should not be distributed unequally and those with the greatest resources receive the greatest amount," he said. "That is antithetical to the principle of equity for which we stand and which we are incorporating in all our policies and practices."

We have no idea what that means either, but the agency has said in the past that it wants to end the practice of having some homeowners subsidize premiums for newer, pricier waterfront homes.

It's unclear how that goal is served by imposing draconian rate increases on residents of a poor state who have historically been pretty responsible about keeping up their flood insurance policies.

The irony of Risk Rating 2.0 is that a program designed to assign costs to rich owners of beachfront vacation homes will leave Louisiana, with its working coast, more vulnerable the next time a mighty storm attacks.

Already, the number of flood insurance policies in effect in the state has dropped by almost 8%. And that's before the full weight of the rate increases comes into view.