FEMA postpones flood insurance rate revamp amid backlash
FEMA is delaying a sweeping overhaul of flood insurance rates by one year, after the planned changes sparked concerns in Congress about premium hikes.
The agency said its Risk Rating 2.0 initiative will be implemented on Oct. 1, 2021, rather than Oct. 1, 2020 — a move that takes off the table a potential spike in rates for homeowners in the run-up to next November’s elections.
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Under the initiative, which FEMA announced in March, the Trump administration is seeking to modernize the system by which the National Flood Insurance Program assesses risks and sets insurance rates for millions of homeowners across the country.
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The revamp is intended to provide a more accurate picture of perils facing individual properties, meaning it would likely lead to higher flood insurance rates for some homeowners and lower rates for others. The potential for rising flood insurance costs has spurred coastal lawmakers over the last several months to push back on FEMA's efforts. For them, the delay was a welcome development.
"This should have been announced long ago," Rep. Garret Graves (R-La.) said in an interview. "FEMA has been as clear as mud about what Risk Rating 2.0 actually is."
The delay underscored the struggle in modernizing the program, which is in debt to the Treasury after years of devastating hurricanes. Its approach to assessing risk has largely gone unchanged since the 1970s.
"It's complicated," said Laura Lightbody, who directs the flood-prepared communities initiative at the Pew Charitable Trusts. "But the purpose of doing it is to make sure that rates better reflect today's risk. Changing the date I don't think should be the focus."
FEMA said it was postponing the changeover because more time was needed for a comprehensive analysis of the proposed rating structure. FEMA's goal as it conducts further review is "to protect policyholders and minimize any unintentional negative effects of the transition.”
The extension, FEMA said, would also allow for all NFIP policies to change over to the new rating system at one time, rather than a phased approach as originally proposed.
"Over the course of the next year, FEMA will continue to actively engage with Congress and other key stakeholders to ensure transparency and visibility as we work to transform the NFIP," the agency said.
The problem for many coastal lawmakers ahead of Thursday's announcement was that FEMA had not conveyed what the potential impacts of Risk Rating 2.0 would be.
That concern prompted 64 House members to demand last week that new caps on premium increases be included in a long-term flood insurance program reauthorization bill that is awaiting a vote on the House floor, as well as a delay of Risk Rating 2.0.
"Republicans, Democrats, House, Senate, all of us have been pushing FEMA to provide some transparency, to open up the black box, to help us understand what they're doing and how our reauthorization should take that into consideration," Graves said. "It has been impossible to do so."
In the House and Senate, members on Thursday signaled they were undeterred in pushing for new affordability protections in upcoming flood insurance reauthorization bills.
Rep. Frank Pallone (D-N.J.), chairman of the House Energy and Commerce Committee, said in a statement Thursday that a "strong premium cap" was needed in the flood insurance legislation to protect homeowners.
Sen. Bob Menendez (D-N.J.), who has been leading the charge in the Senate, also viewed the delay as only a temporary fix. He planned to push for a "single-digit cap" on annual rate increases and a strong affordability program, a Menendez aide said.
"A one-year delay does not alleviate the concern and likely pain for policyholders during a five-year reauthorization without meaningful caps and affordability built into the NFIP program," he said.