Flood insurance is up 122% on average in Louisiana, reports show

Louisiana homeowners are expected to see a 122% increase in their regular flood payments over the next several years, newly obtained data show, recalling the state’s flood insurance program that has drawn concern from local officials.

These numbers are estimates, and could rise significantly due to the severity of climate change, including increased storm surges and rising sea levels.

The data was obtained by The Times-Picayune | Advocate from FEMA via public records request. The agency, which administers the National Flood Insurance, has previously refused to release the figures, adding only the first year under the new system, which hides everything.

Rate increases are limited to 18% per year in most cases, and under the new system they will increase annually at that rate until interest, or “full interest,” is reached. The new policies will be priced at the new prices immediately, however, some people have already expressed dismay at the increase they are seeing.

The average risk premium for a single-family home in Louisiana under the new plan, including fees and charges, is $1,700 compared to $766 under the old plan — a 122% difference. Both the expected and past payments are based on data as of May 2020, FEMA says.

People who live in the most vulnerable areas are exposed to the highest levels of traffic. Much of southern Louisiana, because of its proximity to water and low-lying terrain, is at high risk. For example, FEMA data shows that Louisiana residents who live more than 100 miles from the coast at a depth of 37 feet will see the lowest prices.

FEMA officials could not immediately say how high Louisiana’s flood insurance coverage compares to other states. Louisiana has the highest score in the nation in the NFIP, with nearly half a million points.

‘It underlines our concerns’

The revision marks the biggest change in flood insurance coverage since the program began in 1968. It aims to accurately price risk by combining data from each home through a complex algorithm, abandoning the old system that relied heavily on FEMA flood maps.

FEMA says the new plan will be good for everyone, noting that “the higher the risk and the higher the cost, the more you will pay in flood insurance.” To help achieve that goal, the cost of renovating homes is a key factor in determining pricing in the new system, which aims to ensure that high-value homes pay their fair share.

But local leaders fear that the sweeping change known as Risk Rating 2.0 will reshape the housing market in southern Louisiana, potentially leading to foreclosures or leaving working families unable to afford housing in their neighborhoods.

“While we appreciate FEMA’s efforts to ensure Louisiana is fully at risk, this reflects our concerns about affordability and reaffirms the need for FEMA to address the weight of each section of the Risk Rating 2.0,” said Michael Hecht, chief executive of Greater. New Orleans Inc., a local economic development organization that has also established a national partnership for flood insurance.

FEMA has met calls to provide information on how its algorithm calculates risk through new measurement factors, which, in addition to replacement cost, include elevation and proximity to water, among others.

The agency says rates went up every year under the old plan, and says that about 20% of policyholders will see a decrease under the new one. But the increase in the old system is about 10% per year, according to FEMA, and the decrease in Risk Rating 2.0 will happen only once, in the first year.

Beyond affordability, there have also been concerns about whether more people will drop out of the program due to overcrowding and be left without flood protection — and there are early signs that those fears may be allayed.

Between June 2021 and June 2022, the most recent figures show, the number of flood policies in effect in Louisiana decreased by 7.8%, while the state as a whole decreased by 9%. Risk Rating 2.0 went into effect for the new results in October, while the existing ones started to see the change with their first update starting in April.

FEMA says the reduction in policy may have been due to a variety of factors, including economic pressures due to the pandemic, inflation and affordability, adding that “we remain confident that policies will improve, over time, under our new Risk Rating system.”

FEMA’s internal research, however, estimates that about 20% of policyholders are likely to quit within ten years. The agency says it used “pessimistic assumptions” in the analysis.

‘Principle of equity’

During a trip to New Orleans last week, Homeland Security Secretary Alejandro Mayorkas defended the new plan.

“The rating system has a very strong foundation, and one of the principles, which is the principle of fairness … that the insurance that is distributed should not be distributed equally and those with the greatest wealth receive the most money,” he said. “This is against the same principle that we stand for and that we are incorporating into all of our policies and practices.”

FEMA said the changes would end the practice of paying for newer, higher-priced buildings with older buildings under the old system since the maps were a poor tool for assessing risk.

There is broad consensus on that goal, but state leaders fear unintended consequences in southern Louisiana, where everyone lives near some kind of water.

Louisiana’s congressional delegation has repeatedly called for more transparency in addition to proposing restrictions on the impact of the new tariffs. FEMA itself has provided financial assistance to people in need, but congressional approval is required for such a program.

In a letter to the flood program chief last month, Sens. John Kennedy and Bill Cassidy of Louisiana contacted their counterparts from other Gulf Coast states to request information.

“The means-tested aid system will not reduce the future hardships that may be faced by low-income or low-income recipients according to traditional norms,” ​​the letter said.

“In five to 10 years, we’re going to start seeing more and more Americans who can’t afford to pay NFIP below Risk Rating 2.0 and still be in their homes.”

The new system sees the flood program set more favorable rates, similar to the private sector. Doing so could help put the program, which is nearly $20 billion in debt, on a path closer to completion, though industry experts say catastrophic events always result in significant budget deficits.

For example, flooding after a federal levee failure during Hurricane Katrina resulted in $16 billion in damages. For this reason, there have been calls for major changes to the NFIP, including the elimination of credit after such disasters.