Flood Insurance
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Last month, U.S. Reps. Bill Cassidy, R-Baton Rouge; Maxine Waters, D-Los Angeles, and the other House members of the Louisiana congressional delegation signed a letter with 73 members asking House leaders to help move a one-year delay to National Flood Insurance Program rate increases.
Speaking from the U.S. Senate floor Friday, Landrieu said lawmakers are still working to agree on the right changes to make to the flood insurance program, but that coalition to enact changes is growing. In Louisiana, this is our No. 1 problem and challenge right now, she said. The NFIP was changed last year by Congress to make the program more financially self-sustainable. Many of the changes amount to phasing out the status that allowed properties built decades ago to be grandfathered into the flood insurance system at much lower rates. The cure was worse than the disease, Landrieu said. The NFIP has been in financial distress with a loss of nearly $25 billion, largely due to payments made after hurricanes Katrina and Rita in 2005. Louisiana has nearly 500,000 flood insurance policies and there are more than 5.5 million NFIP policyholders nationwide.
Louisiana lawmakers specifically want to change some rates impacting grandfathered properties and a trigger that allows rates to jump suddenly to unaffordable levels when homes are sold in some areas. Rate increases for some properties began being phased in on Oct. 1.
The government shutdown has caused the indefinite delay of a congressional symposium and a U.S. House hearing to discuss the flood insurance concerns. But Cassidy, U.S. Rep. Cedric Richmond, D-New Orleans, and a group of nearly 20 House members met behind closed doors on Wednesday to discuss possible solutions. Cassidy said afterwards that many in Congress are recognizing the problem.
The system that’s been set up would put the program into a death spiral at which point it ceases to exist, Cassidy said, adding that he recognizes House Speaker John Boehner, R-Ohio, is busy with government negotiations. But, I’d like to think that we can make this come to his attention, he said. The House already approved a one-year delay to rate hikes and the Senate has a pending Homeland Security appropriations bill that does the same thing. The federal budget stalemate is preventing further progress for now.
The rate increases are beginning to being phased in this month. They apply to some homes and businesses built prior to the first 1973 federal flood maps. The Oct. 1 trigger applies to properties businesses, secondary vacation homes and homes that have been repeatedly flooded that were grandfathered into artificially lower premiums for flood insurance before flood maps were created. Such impacted policyholders will see 25 percent annual premium increases over a few years. But such subsidized properties sold after July 6 last year when changes in the law first began being put into service will not have their new rates phased in. That is because the rates for such subsidized residences are triggered all at once when a home is sold or the flood insurance policy lapses.
About 18,000 Louisiana policies will see immediate impacts as non-primary residences, businesses and repetitive-loss properties built before the flood maps. Another 50,000 or so primary residences from before the 1973 flood maps are not impacted until they are sold or the policy lapses, according to FEMA.
However, many more policyholders currently not listed in high-risk flood zones will see rate hikes in a year or more as new flood maps are finalized. More properties will be listed in higher risk flood areas in updated maps as homes lose their grandfathered statuses.
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