Coalition urges FEMA to make changes amid rising flood insurance premiums

NEW ORLEANS (WVUE) – Hurricane Ian inundated southwest Florida with storm surge at a time when the National Flood Insurance Program is losing ground.

On Friday (September 30), the Coalition for Sustainable Flood Insurance led by GNO Inc. released a white paper evaluating FEMA’s Risk Rating 2.0 methodology for determining premiums and affordability.

Michael Hecht is President and CEO of GNO Inc.

“Based on these nationwide increases, already 9% of NFIP policyholders, over 400,000 households, have dropped out of coverage. And an internal FEMA study suggests that 20% should drop,” he said.

Still, Ian can help elevate the flood insurance debate.

“You’re going to see two effects of this one going to financially worsen the overall flood insurance landscape, but on the other hand, it’s going to increase the political attention on this,” Hecht said. “Financially it’s a challenge but politically this action will likely give us a bigger voice in DC”

In October, FEMA implemented Risk Rating 2.0 in an attempt to help the NFIP become more financially sound.

John Media is head of Risk Consulting and Claims Advocacy at Risk Strategies, a national specialty insurance brokerage and risk management consulting firm.

He said that in areas affected by Ian, it may be some time before the full damage can be assessed.

“We are in the early stages of assessing the damage that has taken place and it is a devastating and very terrible loss that they are suffering at this stage. At the moment we are working with many recovery companies We have a number of teams there that had staged themselves from the start,” Meder said.

Yet it is clear that floodwaters caused a significant portion of the known damage.

“Right now the early indications we’re seeing of this loss, again there will be significant losses, it’s been mainly flooding so far and we have wind losses we’re seeing,” said Meder.

The coalition report says that, according to FEMA data, Jefferson and Orleans Parishes have the highest number of single-family residence policyholders in Louisiana, and of Jefferson’s nearly 85,000 policyholders, 80% face annual premium increases of up to $120. And 81% of Orleans policyholders will face higher premiums due to the 2.0 risk rating.

Hecht says FEMA must act to improve the situation.

“The first is that we need transparency, just like we do a credit score, we need to understand what’s in the risk rating so we can take steps to reduce our costs,” Hecht said. “The second thing is we need affordability because it’s not just flood insurance now, it’s your home insurance, it’s car insurance, it’s health insurance , it’s gasoline, its groceries and so all of that together creates a cost of living crisis.”

The recommendations of the study:

–FEMA should disclose the factor by which premiums change for NFIP policies by zip code, county, and state and disclose the estimated RR2.0 total risk premium and total policy costs

— FEMA should clearly disclose expected rates of premium rate increases in RR2.0 to remove uncertainty for policyholders and allow households and housing markets to prepare for higher NFIP policy costs students.

— FEMA should counter the known negative relationship between price and participation by enacting a plan to increase annual premiums at low rates until Congress authorizes an affordability framework.

–Legislators should carefully consider the limitations of affordability frameworks that rely solely on income ratios to determine program eligibility. The housing burden should be an additional tool to target and fairly distribute aid in areas with higher housing burden

–Legislators and stakeholders should continue to evaluate the design of the affordability program, pursue legislative enactment of an affordability program, and communicate clearly to FEMA the desired outcomes of policy implementation NFIP Affordability Policy.

Property insurance rates were rising before Ian arrived in Florida. FOX 8 asked Insurance Commissioner Jim Donelon if he thinks Ian will make the overall insurance situation worse.

“It will, but it depends on the severity of the situation. If it’s an Ida level event it won’t have a significant effect on our costs, if it’s a Katrina level event it will,” he said. -he declares.

In recent months, Louisiana has lost insurers due to defaults or their removal from the state. Still, Donelon thinks half a dozen companies are ready to write new policies after this hurricane season ends.

“I’m cautiously optimistic it will depend on how big of an event Ian ends up being from an insurance perspective, but I don’t think that will deter it, it could push prices up more than expected the next year,” he said. said.

However, companies also do business in Florida. “Probably all six are writing in Florida,” Donelon said.

And despite higher flood insurance costs, they urge homeowners not to give it up.

“There are a lot of benefits that come with it, I know the premiums are going up. I would strongly encourage people to keep buying the coverage as we now see this event coming out with Hurricane Ian, it’s a flood loss,” Meder said.

Donelon said, “The best insurance buy you can make is still significantly subsidized by the federal government’s National Flood Insurance Program, even after the implementation of Risk Rating 2.0.”

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