FEMA makes flood rate process public

After months of clamoring for the public release of scheduled rate increases to the National Flood Insurance Program, that information was released by the Federal Emergency Management Agency Wednesday, but not much has changed.

The Biggert-Waters Act of 2012 tasked FEMA with making the program self-sustaining through ending rate subsidies and the implementation of actuarial rates. Those affected have been confused about the changes as FEMA told people to call their insurance agents to determine what rates would apply to each policy.

Insurers historically used the Specific Rating Guidelines to calculate premiums for a variety of properties with a high risk of sustaining flood damage, particularly rates for buildings where the lowest floor elevation is below the base flood elevation. This document is issued annually to insurance partners of FEMA.

As a result of the demand from Congress and the public for more transparency, FEMA, for the first time, provided the public with the guidelines Wednesday. Those guidelines and other information can be located on the FEMA website buried in pages of formulas and minutia that eventually leads FEMA to make the same suggestion it has been making for months — if you want to know the rate for your policy, call your insurance agent.

Sen. Mary Landrieu, D-New Orleans, said she is pleased FEMA made the information public, but it is late in coming and the information is disheartening.

“It took FEMA far too long to make this critical information available to communities in Louisiana and across the nation trying to prepare for the steep rate increases that are scheduled to take effect on Oct. 1,” Landrieu said in a news release Thursday. “While I am pleased that FEMA followed up on commitments made during their recent trip to Louisiana, I remain very concerned about the impacts these rate increases will have on homeowners and small businesses throughout the nation.”

“The data … underscores the affordability issues that I have been concerned about since Biggert-Waters first came to the floor for a vote last summer,” Landrieu said in the release. “It is imperative that we secure comprehensive reform like my SMART NFIP Act.” I will continue to push for its passage.” That act pushes for the delay of implementation of the Biggert-Waters act, among other things.

The scheduled Oct. 1 rate increase removes subsidized rates for new policies and properties that have had repeated claims. It is still on track to implementation but the Louisiana delegation is among others that are trying to delay those rates.

Shortly after Biggert-Waters 2012 was signed into law in July 2012, Landrieu and Frank Lautenberg, D-N.J., sent a letter to FEMA expressing their concerns, writing: “We respectfully request that you establish a plan to help residents cope with increased costs as a result of the law.”

Landrieu’s release said the SMART NFIP Act would delay premium increases, repeal provisions preventing new owners of sold homes to maintain subsidized rates and allow the rebuilding of key community facilities destroyed in a disaster that lie in high-velocity zones.

After 45 years, flood risks continue to change, and the costs and consequences of flooding are increasing dramatically. Congress called on FEMA to make a number of changes to the way the flood insurance is managed. Some of these changes have already been put in place, and others will be implemented in the coming months. Key provisions of the legislation will require the program to raise rates to reflect true flood risk, make the program more financially stable and change how flood map updates impact policyholders. The changes will mean premium rate increases for some — but not all — policyholders over time.

The new law eliminates some artificially low rates and discounts. Most flood insurance rates will now move to reflect full risk, and flood insurance rates will rise on some policies as much as 25 percent annually until actuarial rates are reached.

Landrieu said no amendments were allowed during the debate, including one authored by her that would have created a pilot program to provide means-tested assistance to working and middle class households to help purchase flood insurance.

Many properties built below the base flood elevation and before flood insurance rate maps and minimum floodplain management requirements were adopted in community ordinance (known as pre-FIRM properties) received subsidized premium rates that were lower than true risk.

Biggert-Waters 2012 requires FEMA to immediately eliminate subsidies for certain properties, such as property purchased after Biggert-Waters 2012 was enacted, property insured by policies that have lapsed or were purchased after the act was in place. These properties may now be rated using the Specific Rating Guidelines.

The new tables and underwriting procedures in the guidelines reflect those mandated changes.

Flood insurance premiums are based on a number of factors, including the elevation of the lowest floor of the building, the type of building, the number of floors, whether a building has a basement or enclosure, use of flood mitigation techniques such as breakaway walls and flood vents and the property’s geographic location in reference to flood hazards identified by the community and FEMA.

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