Coastwide
Bloomberg

USA - 81% of Flood Insurance Policyholders Will See Rate Increases, Report Says

When the Federal Emergency Management Agency rolled out a major overhaul to its beleaguered National Flood Insurance Program last April, it promised that bigger, richer homes would bear the brunt of premium increases, while almost 90 percent of policyholders would see their costs stay stable or decrease.

When the Federal Emergency Management Agency rolled out a major overhaul to its beleaguered National Flood Insurance Program last April, it promised that bigger, richer homes would bear the brunt of premium increases, while almost 90 percent of policyholders would see their costs stay stable or decrease.

But as the program goes into effect this month for existing policyholders, more than 80 percent of thosehomeowners are set to see rates climb and those gains will be spread largely evenly among rich and poor areas, according to a new report from the real estate firm Redfin. The report also found that “Majority-Hispanic” neighborhoods are more likely to see their flood-insurance premiums rise than any other major ethnic or racial neighborhood group, with 84% of policyholders facing increases.

The NFIP serves roughly 3.4 million single-family homes, most of which are in high-risk flood areas. The program was created in 1968 to cover homes that private insurers either didn’t want to cover or would only cover at a relatively high cost. The government offered more modest premiums, but the result is that over time the program has gone broke. It has more than $20 billion in debt, in part because of climate change-related phenomena such as rising sea levels and more storms. Those have led to more widespread flooding, causing more damage than the premiums could cover.

For years, FEMA tried to reform the program to make premiums more reflective of actual costs, but it was unpopular with Congress and constituents. Last year, FEMA rolled out a reform known as Risk Rating 2.0, based on cutting-edge science and modeling techniques. The new program aims to be more equitable by setting rates based on the risk of individual homes, as opposed to the risk of all the homes in one risk zone as the old method did. The idea is the new system would charge higher premiums for the riskiest homes, while many of the other homes in the program would actually see lower premiums. FEMA also said that rates would be no more that 18% per year and be capped at $12,000 total. It also said that mostly expensive homes would bear the brunt of the premium increases.

Read more.