The Federal Emergency Management Agency has announced a major plan to overhaul how risk is assessed in the National Flood Insurance Program, which could mean major changes for Louisiana homeowners, but details remain murky and state officials say they're holding out hope for an ultimately positive outcome.
The proposal, dubbed “Risk Rating 2.0” is being done within FEMA’s statutory abilities, so it won’t take approval from Congress, which is discussing a long-term reauthorization of the flood insurance program, through which nearly half a million Louisiana residents are insured.
Gov. John Bel Edwards’ administration said it’s awaiting more details to have a better understanding of the overall impact to Louisiana.
“While we understand that better clarity about flood risk is vital to our future resilience, we’re also concerned about how any increased costs would impact homeowners and small-business owners,” Edwards spokeswoman Shauna Sanford said.
The overhaul would fundamentally change how flood risks are assessed. Instead of the flood plain maps now used, FEMA would be able to assess on a property-by-property basis and will now calculate overall flood risks.
A FEMA spokesman said the agency has been discussing ways to improve the rating system over the past few years. “We now have the capabilities and technology to carry out fundamental changes in the way the NFIP analyzes and prices risk,” the spokesman said.
FEMA initially planned to roll out the new rates in geographical segments but has switched to plans for a national rollout to all single-family homes to provide more consistency. The new rates will be established by April 2020 and go into effect on Oct. 1, 2020.
“It’s a big deal,” said Michael Hecht, president and CEO of Greater New Orleans Inc., which has been involved in the ongoing discussions with FEMA. “We have a year and a half to try to understand and adjust to it.”
Hecht said he thinks there are some positives in the new proposal. Advocates have been pushing for years for more accurate maps. “More accuracy is, in the long haul, a good thing and should convey better information to policyholders and the market in general,” he said.
Hecht said he believes the grandfathering in of guardrails will help keep the program affordable, and the overhaul will encourage more people to join the program, which helps drive down costs.
“It’s important that the program is affordable — obviously there is a fiscal and moral imperative that people who have played by the rules should remain in their homes,” he said.
Hecht said he thinks major spikes in the program would be unlikely.
“There would be a bipartisan constituent revolt,” he said. “Unfortunately, we’ve seen now ever-more flooding disasters. We used to say if it rains, it can flood; what we’re seeing now in Iowa is that if it snows, it can flood.”
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“If it were to become unaffordable, it wouldn’t just be impacting south Louisiana,” he said.
U.S. Rep. Garret Graves, R-Baton Rouge, said the overall impact could be positive, but he wants to see more information from FEMA to make sure it’s an improvement.
“There’s not a lot of details behind what exactly that means, but for the big picture — at least, what we’ve been told — any effort to improve the accuracy of risk is good,” Graves said. “I certainly welcome any effort to better communicate risk and vulnerability.”
FEMA’s aim is that new state-of-the-art catastrophe models combined with the ability to leverage the flood insurance program's mapping data will provide a more comprehensive understanding of risk.
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“Our new system will determine a customer’s flood risk by incorporating multiple, logical rating characteristics — like different types of flood, the distance a building is from the coast or another water source, or the cost to rebuild a home,” the FEMA official said.
The new rates will account for heavy rainfall like Baton Rouge experienced in 2016, as well as different types of flooding at a single location — for example in coastal areas where flooding is caused by surge as well as river overflow.
“They will also account for the greater range of flood frequency,” the FEMA official said.
FEMA said it plans to roll out the new rates with affordability measures, including possibly having a phased-in approach. Existing statutory limits on rate increases will also apply.
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LSU professor Nina Lamb, an expert on flooding issues, said the system the flood insurance program has outlined is “very interesting."
“It probably will affect Louisiana a lot, but it all depends on how exactly flood risk is determined in this new policy,” she said. “Whatever the policy is, it’s probably better to implement it in a way that is incremental.”
She said affordability has to be a critical component for a successful update.
“Many people would have no means to move or pay high rates,” Lamb said. “We have to consider fairness of the issue, too.”
U.S. Sen. Bill Cassidy, R-La., who has in the past partnered with Sen. Kirsten Gillibrand, a New York Democrat now running for president, on proposals to update the program said he’s glad that FEMA’s new ratings plan incorporates parts of their recommendations.
“My first priority is to ensure any proposal changing the National Flood Insurance Program is sustainable and affordable for Louisiana homeowners,” he said. “It needs to accurately account for local flood protection structures when determining the risk profile for homes.
“My office will continue to engage FEMA and its rollout of Risk Rating 2.0 as we draft the reauthorization of the NFIP with my Senate colleagues,” he said.
Graves said he would like to see the commitment to assessing risk broaden.
“There’s not much accuracy to the maps, and unfortunately, those less-than-accurate maps have a lot of gravity in terms of flood insurance premiums,” Graves said. “It’s frustrating to have a less-than-accurate map that carries a lot of weight.”
He said he thinks that part of risk assessment should also consider who is responsible for the risk.
“In the case of Louisiana, I believe we are at greater risk than what some people’s maps show today, but do I believe that homeowner has a damn thing to do with the risk they are subjected to? No,” he said. “We’re at the bottom of one of the largest watersheds in the world.”
The Mississippi River in Baton Rouge this week hit one of the top record highs due mostly to snow and waterfall in the north.
“The vulnerability came to us; we have no control over it,” Graves said. “Do we need to charge more for it in Louisiana? That’s not fair.”
Graves said he hopes that the flood insurance program discussion will spur more thought about resiliency. If the program has home-by-home data to use for rates, that same data should be used to dictate where money should go to prevent flooding, Graves said.