Can the National Flood Insurance Program be sustainable & affordable?

Published 12:00 am Wednesday, April 6, 2022

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It’s officially April, and families in South Louisiana have more to fear than the weekly bouts of severe weather we have come to expect each spring. The implementation of FEMA’s Risk Rating 2.0 on April 1, 2022 has opened the door for flood insurance prices to skyrocket as policies come up for renewal, causing many to question whether they can afford protection.

Around 77% of policyholders are expected to see premium increases nationwide. Costs have the potential to climb up to 18% per year until a property reaches its full risk rating under the new system. Regional leaders, including St. John Parish President Jaclyn Hotard and St. Charles Parish President Matt Jewell, have been vocal in their opposition to the new rating system. FEMA has maintained that most policyholders will see relatively minor cost increases of $0 to $120 per year. However, during phase one of the Risk Rating 2.0 rollout that began with new policies in October 2021, Louisiana Rep. Garret Graves said some policyholders saw their premiums inflate up to 800%.

Risk Rating 2.0 has been referred to as “Equity in Action,” but can it truly be considered equity if rising costs price families out of obtaining the protection they need against natural disasters?

Voices from across the region are calling for a stop to Risk Rating 2.0, but reverting to the old system isn’t a viable option. When the National Flood Insurance Program was created, the intent for it was to be self-sustaining and affordable. Over the years, the program has missed the mark on the “self-sustaining” aspect and has hit $20.5 billion in debt. FEMA believes that the new system will sustain the program by more accurately reflecting flood risk, resulting, in most cases, in higher premiums for policyholders.

While I’ve seen opposition to Risk Rating 2.0, I haven’t seen solutions presented. Mitigation to lower flood risk would surely help residents in the long run. These plans are already in action, particularly with the ongoing construction of the West Shore Levee and new “greener” development projects such as the LA Safe Airline and Main Complete Streets Project in LaPlace. St. John Parish successfully improved its Community Rating System score from an 8 to a 7 in 2020, which afforded residents a 5% discount on flood insurance rates in 2021.

It’s still too early to know how these efforts will reflect in flood insurance renewals this year under Risk Rating 2.0. It doesn’t seem fair that a majority of policies are expected to increase in spite of expanding mitigation efforts, so what else can be done to lower premiums?

Diane P. Horn, analyst in Flood Insurance and Emergency Management, asked the same question. Published by the Congressional Research Service, “Options for Making the National Flood Insurance Program More Affordable” reported information that should be considered by our legislative leaders.

A few of these topics stood out to me, including capping premiums, bringing flood insurance to the community level, and increasing federal allocations to the National Flood Insurance Program.

Part of the problem I’ve observed with Risk Rating 2.0 is that there doesn’t seem to be a limit on how much a premium can increase over time. While yearly increases are capped at 18%, policyholders might see that annual 18% increase for a decade before reaching the full risk rating. Capping expenses could be done on an individual level based on a policyholder’s income or on a community level based on average income and poverty data.

If an income-based approach is used, FEMA would be responsible for contributing what policyholders are unable to pay. Another idea would be charging individual communities to pay for partial or full flood insurance costs for residents. Depending on the cost, I am not sure how feasible this would be, or if grant funding could be utilized to ease the financial burden.

According to Horn, the National Flood Insurance Program is paying more than $400 million a year in interest to the Treasury to account for funds that have been borrowed. If interest payments were waived moving forward, could that money be more effectively used to accelerate mitigation efforts or lower premiums to policyholders? Another possibility is to increase federal allocations to the program so that 95% of its funding wouldn’t be on the backs of the policyholders who represent only 5 million structures across the country.

I look forward to seeing more solutions presented to keep this program solvent and affordable. It’s critical for our communities.


Brooke R. Cantrelle is news editor for L’OBSERVATEUR. She can be reached at