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Louisiana GOP Sen. Bill Cassidy said affordability of NFIP policies is becoming increasingly difficult for homeowners or businesses in particularly flood prone areas, including his home state.
“NFIP’s new risk assessment policy called Risk Rating 2.0 has made flood insurance simply impossible to afford; in some cases policies rising over 1,000%,” he said.
“At this point, we know that we’re in an actuarial death spiral, where people will be dropping insurance because they can no longer afford (it); therefore a smaller number of people for whom to put on the risk. Therefore, more expensive premiums and therefore more people drop,” Cassidy added.
Michael Hecht, president CEO of Greater New Orleans, Inc., testified that the new pricing system for flood insurance has caused some premiums to increase substantially, leading to significant problems for people and business owners who need to operate along the coast.
Hecht told the committee that 50% of U.S. grain exports leave through the port of South Louisiana and that the new pricing should take that into account.
“If our workers cannot live there, this is going to have impacts on our ability to supply America and the world with food,” Hecht said.
The Federal Emergency Management Agency, which manages the NFIP, projects that about 900,000 people will cancel their policies, representing a 20% drop in participants, he said.
Congress should take that into consideration when it reauthorizes the NFIP by requiring a “thorough and holistic analysis of economic impacts, mandating FEMA’s transparency through the release of a usable public facing risk calculator and also a rating appeals process,” Hecht said.
The cap on insurance premium increases should be lowered from 18% to 9%, he said.
Daniel Kaniewski, managing director at Marsh McLennan insurance company, told the committee that hazard mitigation is one of the more important things that Congress can do to address the costs of flooding and recovery.
“Not only does it protect existing homeowners against their existing risk, it helps protect homeowners in the future and … anyone else who purchases that home in the future against future risks,” Kaniewski said. “It also gets at the affordability issue, because if you’ve reduced your risk, you should also be able to reduce your rates.”
Flood insurance out of reach for some families
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