New Flood Rates Debut Oct. 1 Unless Congress Acts
The Biden administration doesn’t plan to stop FEMA’s “Risk Rating 2.0” from going into effect, leaving Congressional leaders to decide. NAR backs the new structure that charges by individual home rather than flood zone, but it’s facing opposition from other real estate groups.
WASHINGTON – Flood insurance is an unusual problem for lawmakers because it doesn’t break along party lines. In general, representatives from coastal states oppose any change that raises rates, while landlocked state representatives do not.
The Federal Emergency Management Agency (FEMA) oversees the National Flood Insurance Program (NFIP), and it has been planning a new way to levy flood policy fees for a few years. That new system currently goes into effect on Oct. 1. A major difference of the new pricing policy, called Risk Rating 2.0, is that homeowners in a single flood zone who currently pay the same rate will find that each policy is individually priced based on other factors, such as changes made to the home that help mitigate potential flood damage. FEMA says 2.0 more accurately assesses a home’s flood risk.
The National Association of Realtors® (NAR) supports the change, though other housing groups do not.
“NAR supports FEMA’s Risk Rating 2.0 reforms and its current timeline for implementation,” Realtors spokesperson Patrick Newton told Politico. “These reforms are phased over time and will provide policyholders with more accurate, risked-based flood insurance rates.”
Neither FEMA nor the Biden Administration is backing down so far, and opponents have turned to Congress for help. In the House, 38 House representatives recently asked congressional leaders to postpone implementation and hope to include a delay in bills expected to pass this month.
NFIP senior executive David Maurstad says any delay would be unfair, largely because about 1 million current policyholders will see their rates drop. Overall, FEMA says about 19.8% of homeowners would see lower flood insurance costs, 68.1% would see no change or, at the least, a yearly increase of less than $120. However, 7.8% would see their premiums rise by $120 to $240 per year, and 4.2% would pay a new premium greater than $240 per year.
Risk Rating 2.0 is the biggest change for NFIP since the 1970s. It will impact new flood policies issued after Oct. 1 – such as those paid by new homebuyers – and it will affect current homeowners when it comes time to renew their flood insurance policy. Those who benefit from lower rates under Risk Rating 2.0, however, will be able to request that lower rate.
Lawmakers opposing the change point out various concerns, but a big one is that NFIP can raise rates no more than 18% per year – an amount they say is too high.
According to Politico, the 38 House members sent a letter to Speaker Nancy Pelosi and Minority Leader Kevin McCarthy. In it, they said, “There are serious implementation questions surrounding Risk Rating 2.0 … Our constituents and those involved in implementing FEMAs rate hikes need more time to get the answers they deserve.”
Within the real estate industry, opinions are divided. While NAR backs the change, other groups, such as the National Association of Professional Insurance Agents, say their industry isn’t prepared for Oct. 1 changes, citing operational problems. The American Property Casualty Insurance Association cited problems but didn’t call for an actual delay.
However, 16 groups – including the National Association of Mutual Insurance Companies, the Association of State Floodplain Managers and the Natural Resources Defense Council – don’t want a delay. They generally agree that Risk Rating 2.0 is “more accurate and more equitable, and that providing property owners with more information on their full risk rates was critical to improving flood mitigation,” according to Politico.
Source: Politico Pro, Sept. 9, 2021
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