National Association of Counties
Washington, D.C.

 Flood insurance policy changes could increase premiums dramatically

By Charlie Ban

 Photo courtesy of St. James Parish

Aerial shots of St. James Parish, La. show the flooding that resulted from Hurricane Isaac in 2012. 

Parishes in Louisiana are starting to press their congressional delegations to amend recent changes to the National Flood Insurance Program (NFIP) upon which their residents rely.

The changes were enacted to help bring the federally managed insurance program out of debt. FEMA, which administers the program, released new flood insurance actuarial data Sept. 4, giving the rest of the country an idea how their premiums will change.

Also on the table are new flood plain maps, which could dramatically alter insurance premiums for homeowners.

Louisiana was the first state to have new flood mapping completed after the reforms were passed, and consequently is serving as a test site when those reforms are enacted. New York and New Jersey are also being remapped, following 2012’s Superstorm Sandy.

St. James Parish President Timmy Roussel said that up to 100 homes in his parish and 1,000-plus homes in nearby St. John the Baptist Parish could see drastic increases in their flood insurance premiums.

“Houses that were paying $600 a year for their premium could end up owing $20,000,” he said. “We have some questions about new policies that if they aren’t addressed could put people out of their homes.”

The expected leap in insurance premiums can be laid at the feet of  the Biggert-Waters Flood Insurance Reform Act, which reauthorized  NFIP in 2012, after 17 post-Hurricane Katrina extensions. Reauthorization seemed like good news to flood-prone counties until three details came to light that would drive up insurance costs, according to Michael Hecht, CEO of Greater New Orleans Inc., a regional economic development alliance that is home to the Coalition for Sustainable Flood Insurance.

Under the current plans to implement flood insurance reform:

  • grandfathering will be phased out — houses that had previously been built to code are now in violation, according to new flood maps
  • mapping will only recognize remediation work performed by the Army Corps of Engineers — unaccredited levees and pumps not placed by the Corps might as well not exist. “It’s not reflective of true risk,” Hecht said; and
  • actuarial information will be used that create dramatic and sometimes prohibitive changes in premium cost — some as high as 3,000 percent.

“This is a case of unintended consequences,” Hecht said. “It’s a confluence of the Biggert-Waters reforms, inaccurate maps and questionable calculations.”

It’s no surprise to the U.S. Government Accountability Office, which found that “the extent to which the changes included in the act will reduce the financial exposure created by the program is not yet clear.”

The FEMA-run NFIP filled the void when most private insurers dropped their flood insurance policies after Hurricane Betsy struck in 1965. Now, Hecht said, NFIP covers 98 percent of flood insurance policies nationwide.

Mounting debt over the last eight years, totaling more than $20 billion, prompted Congress to demand NFIP reform to help stabilize the program’s finances.

Bullet Click here to learn more about the Coalition for Sustainable Flood Insurance.

The issues with NFIP are not confined to coastal counties. Harris County, Texas recently ordered a study to see how these changes would affect its residents. The county Commissioners Court recently passed a resolution asking FEMA to delay implementation of the reforms until their effects could be studied and the Biggert-Waters Act can be amended.

"This isn’t a beachfront town,” said David Walden, chief of staff for Commissioner Jack Morman. Houston is the county seat. “This is an entire city that is affected and most of it is away from the coast, where we can have some kind of control over flood mitigation. It doesn’t make a lot of sense.”

NFIP policies are active in every state, so eventually all counties, parishes and boroughs will be remapped and residents will see how they will be impacted.

“People are really getting whacked,” Walden said. “It’s good intent gone awry. Everyone knows there needs to be changes to make it viable, but this is way too much too fast.”