Flood insurance rates will soar in some areas, FEMA says

By Thomas Frank | 05/10/2023 06:30 AM EDT

Premiums will increase by thousands of dollars in the riskiest areas. Florida and Louisiana will face the steepest increases.

Flooded home homes and buildings are shown in the aftermath of Hurricane Ian on Sept. 29, 2022, near Naples, Fla.

Flooded homes in the aftermath of Hurricane Ian near Naples, Fla., in September. Collier County residents could see large price increases for flood insurance. Wilfredo Lee/AP Photo

Homeowners in the nation’s most flood-prone areas are facing huge price increases for flood insurance that could cause hundreds of thousands of people to cancel their policies and risk financial ruin if their home is flooded.

The Federal Emergency Management Agency, which runs the United States’ largest flood insurance program, recently published projections showing that its premiums are on track to jump by thousands of dollars a year in some areas.

The projections are the most detailed analysis FEMA has provided since it launched an ambitious restructuring of its National Flood Insurance Program several years ago.


In Plaquemines Parish on the Louisiana coast, the average flood insurance premium is projected to increase by 545 percent — to $5,431 from $842, FEMA data shows.

In Collier County, Fla., which was ground zero for Hurricane Ian, homeowners will pay an average of nearly $4,000 for flood insurance from FEMA. The average premium in the county on Florida’s southwestern coast is currently $1,053.

Average premiums will more than double in 800 of 3,000 counties, according to an E&E News analysis of the FEMA data.

The increases will be particularly steep across coastal Florida and coastal Louisiana, where people also are facing huge increases in the premiums they pay for homeowners’ insurance. Flood insurance is sold separately from homeowners’ coverage, and FEMA sells 90 percent of the nation’s flood policies through its NFIP.

The FEMA price hikes are a result of the agency’s decision in the 2010s to restructure the NFIP to make each premium reflect more accurately each property’s flood risk and to eliminate some discounts.

The restructuring, called Risk Rating 2.0, will take more than a decade to complete as rate increases are phased in each year until every policyholder is paying a premium that reflects the full flood risk of their home or business.

The new rates started taking effect in 2021 — drawing protests from some lawmakers — and are part of a larger effort by FEMA to alert the public about the growing threat of climate change.

“All of this, I believe, is having a significant impact on getting people to better appreciate their flood risk not just around the nation but in their neighborhoods, and that’s a good thing,” David Maurstad, a senior FEMA official in charge of the flood insurance program, said in an interview Tuesday.

“The nation is at risk because of increased climate change and because of increased development in risky areas,” Maurstad added, “and there’s a better understanding of that and how we can all work as one community to not ignore the flood risk this nation faces year after year.”

Carolyn Kousky, associate vice president for economics and policy at the Environmental Defense Fund, said the rate increases could end up being even higher than FEMA projections, which are based on current flood risk.

“With climate change, in some places around the country, we can expect risk to keep increasing. And increasing risk means increasing rates,” said Kousky, one of the nation’s leading experts on flood insurance.

The insurance projections can help officials target the areas most at risk of flood damage for help building resilience to flooding and climate change, Kousky added.

Rate hikes will be phased in gradually due to a federal law that says FEMA cannot raise any individual premium by more than 18 percent in a year. That means some homeowners will see their premiums increase 18 percent every year for more than a decade.

Maurstad said it’s not surprising that rates will increase substantially in coastal Florida and Louisiana “because the risk is higher in those areas.”

Louisiana residents have collected roughly $20 billion in claims from the NFIP — most of it after Hurricane Katrina in 2005. But they have paid less than $6 billion in premiums, Maurstad said.

The new data published by FEMA shows the amount by which the average NFIP premium for owners of single-family homes will increase in each state, county and ZIP code by the time the restructuring program is complete.

Nationwide, the average premium for owners of single-family homes is projected to double — from $888 to $1,808.

The average premium is projected to increase in every county as well as in each of nearly 24,000 ZIP codes across the nation.

Despite the averages, Maurstad said 1 million of the 4.7 million NFIP policyholders will see their premiums decrease — by an average of $85 per month — as a result of the restructuring.

Those policyholders “are more likely to maintain their policy than if we had required them to pay more than what their fair rate was,” Maurstad said. He also said that many of the premium increases would have occurred even if FEMA did not restructure the insurance program.

FEMA’s disclosure of projected rate increases likely will build pressure in Congress to enact measures to blunt the sticker shock.

Rep. Frank Pallone of New Jersey, the ranking Democrat on the House Energy and Commerce Committee, announced on May 2 that he plans to introduce legislation to “reform the entire National Flood Insurance Program.”

Pallone said his bill would “create new affordability measures” and further limit the amount by which FEMA can increase premiums in a single year. New Jersey residents have told Pallone that FEMA flood insurance is “now unaffordable.”

FEMA and congressional Democrats have tried for years to create a subsidy program that would help lower-income households pay for flood insurance. But Republican lawmakers have opposed it.

Maurstad of FEMA said he was optimistic Congress would enact a subsidy program that he said would be “a game changer.”

“I talk to members, and there’s acknowledgement that something needs to be done,” Maurstad said. “It’s a matter of deciding how we’re going to address the affordability problem, not if we’re going to address the affordability problem.”

Kousky of EDF said the projected rate increases “underscore the need for such a [subsidy] program” because “lower-income households in areas of high risk simply cannot afford the cost.”

At a House Homeland Security Committee hearing on April 18, lawmakers warned Homeland Security Secretary Alejandro Mayorkas that the increased NFIP premiums were forcing some low-income homeowners to sell their homes or forego flood coverage.

Mayorkas replied, “We are reviewing and need to continue to review the Risk Rating 2.0 given the concerns that have been expressed with it, and I can assure you that we are doing so and we will report out our results.”

Maurstad said the department, which oversees FEMA, supports the restructuring program.

“I’ve talked to the secretary’s office, and he’s not wavered one bit on his support for Risk Rating 2.0,” Maurstad said.

Clarification: This version of the story clarifies that the $85 increase in flood insurance premiums is monthly.