U.S. Sen. John Kennedy of Louisiana asks President Biden to hold off on flood insurance cost hikes

May 24—A Louisiana lawmaker is calling on the Biden administration to halt a major change to the nation's flood insurance program that could increase costs for thousands of Louisiana policyholders.

The Federal Emergency Management Agency, which administers the flood insurance program, plans to enact something called Risk Rating 2.0 for new policies Oct. 1 and for renewals starting in April 2022. The plan aims to bring insurance costs more in line with the actual risk of flooding and help reduce the program's debt, which hovers at just over $20 billion.

"As best I can tell, about 80% of the people in my state who have to have flood insurance are going to see their rates go up," U.S. Sen John Kennedy, R-La., said in a speech on the Senate floor last week.

FEMA and insurance industry researchers say most of Louisiana's nearly 500,000 policyholders will see their costs increase, but not by much.

Specifically, FEMA estimates 20% of the state's policyholders will see immediate cost decreases. Seventy percent will see their costs increase by up to $120 a year, 7% by up to $240 a year and 3% will see insurance prices rise by more than that.

Risk Rating 2.0 guidelines cape rate increases at 18% a year.

Kennedy said he's concerned the cost hikes are deceptive.

"FEMA's probably going to start by doing a little bit the first year, and they're going to say, 'See, we told you that wasn't going to hurt,' " he said. "But then they're going to do it the second year, and the third year, and the fourth year, and the fifth year and the sixth year."

Recent FEMA statistics show the National Flood Insurance Program, the only place most homeowners can get flood insurance, covered nearly 27,000 local homes with a combined value of roughly $7 billion.

Prices can vary greatly depending on your risk. In Louisiana, the average policy costs $726 a year, according to an analysis released April 27 by ValuePenguin, an insurance research company. The average policy cost $583 a year in Houma and $619 in unincorporated Lafourche Parish.

FEMA, under the Trump administration, planned to enact the new rating system in 2019 but delayed under pressure from members of Congress from Louisiana and elsewhere who were concerned it would push costs to unaffordable levels for many homeowners.

For years, critics have sought to end or curb taxpayer subsidies they say keep policies' costs artificially low and encourage people to build and live in harm's way.

"The new pricing methodology is the right thing to do," David Maurstad, the program's senior executive, said in a news release last month. "It mitigates risk, delivers equitable rates and advances the agency's goal to reduce suffering after flooding disasters."

The program now calculates a policyholder's cost mainly by relying on elevation maps to determine a person's risk of flooding from a 100-year storm. That equates to a 26% chance a home will flood during the life of a typical 30-year mortgage.

Risk Rating 2.0 instead uses a variety of data from science agencies, the insurance industry and others to calculate a home's risk. That includes an area's history of storms, the probability of inland flooding, land elevation, natural barriers to storm surges and tides, coastal erosion and the cost to rebuild.

"The system we've used to calculate flood risk, and in turn insurance policy premiums, no longer holds water," Shana Udvardy, a climate resilience analyst at the Union of Concerned Scientists, said in a prepared statement. "Outdated maps have left homeowners ill-prepared for possible disasters. Risk Rating 2.0 could go a long way in helping homeowners better understand their risk, ensuring they can make informed decisions to protect themselves and their property."

Kristina Dahl, a senior climate scientist with the organization, said the new system will also account for the effects of climate change.

"The science is clear that climate change is causing sea levels to rise, making hurricanes more destructive and increasing extreme rainfall," Dahl said. "We also know that for far too long, neighborhoods and homes that have historically fallen outside of FEMA's designated flood zones have, in reality, already been flooding, which is why updating the ways we evaluate flood risk is so essential."

But local officials and others have long countered that the push to bring costs more in line with the actual risk of flooding will make insurance unaffordable for almost everyone in places like coastal Louisiana, wrecking lives and decimating economies.

FEMA estimates just 4% of the existing 5 million policies across the U.S. will have the highest rate hike — greater than $20 a month or $240 a year, according to ValuePenguin.

"However, because of the geographic factors that influence the cost of flood insurance, some states are more likely to see the highest increases," the company notes. "In fact, more than 10,000 policies each in Florida, Texas, Louisiana, New Jersey and New York will face the highest price increases."

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