A Step Toward Flood Insurance Fairness

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A model home is surrounded by flood waters from Hurricane Delta in Iowa, Louisiana, Oct. 10, 2020.


Mario Tama/Getty Images

Good deeds from federal agencies are rare, and the few put forward don’t go unpunished. The Federal Emergency Management Agency (FEMA) is currently taking a beating for trying to rationalize Washington’s much-abused flood-insurance program.

The Senate Banking Committee held a hearing last Thursday to discuss Risk Rating 2.0, FEMA’s plan to adjust premiums for the National Flood Insurance Program. The rating system would scrap current pricing based on flood zones that were devised in 1978, in favor of a new formula that tailors prices to each property.

That means premium increases for most policyholders.

David Maurstad,

who manages the program and testified Thursday, says the adjustments would better offset the costs of the flood program, which paid $1.2 billion in claims last year.

The new formula would also shift the burden toward owners of more valuable properties. Seventy-seven percent of policyholders would see their premiums rise, but “two-thirds of homeowners who have pre-FIRM subsidized homes are going to see a reduction in their premium,” Mr. Maurstad said. These are houses built before the “flood-insurance rate map” took effect in 1974, owned disproportionately by lower-income policyholders.

Cue the criticism from the caucus that wants taxpayers in Kansas to subsidize owners who keep rebuilding homes on the shore.

Louisiana Sen. John Kennedy

attacked FEMA’s reform plan as a “ferret fire drill” that would soak residents of flood-prone areas. Mr. Kennedy, who called the hearing, has introduced a bill to block the premium increases from taking effect Oct. 1.

New Jersey Sen. Robert Menendez

is writing a bill with the same purpose, and called the new rating system “anything but equitable.”

The premium hikes are necessary because the flood program is insolvent. The program currently owes the Treasury more than $21 billion, racked up by an average of $3 billion a year in claims from 2009 to 2018. The average flood claim in 2018 was $42,580, backed by an average annual premium of $642. Mr. Menendez’s previous reform, the 2014 Homeowners Flood Insurance Affordability Act, made the problem worse by delaying premium increases for the most valuable properties.

FEMA’s new rating system may survive the latest assault. No Senate allies have backed the Kennedy bill, and President


endorsed the premium increases in his May budget. The agency can update its insurance formula without congressional approval.

More reform is needed to get taxpayers off the hook. The same White House budget proposed $358 million in new subsidies for the flood program. But letting FEMA’s changes move forward would be a small step toward fairness and solvency.

Journal Editorial Report: The week’s best and worst from Kim Strassel, Bill McGurn, Jillian Melchior and Dan Henninger. Image: Getty Images/Zuma Press Composite: Mark Kelly

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