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What New Flood Insurance Rates Could Mean For Louisiana

Flooding in Gonzales, Louisiana; August 2016
Flooding in Gonzales, Louisiana; August 2016

The National Flood Insurance Program (NFIP) is set to release new rates this fall, and it’s likely to result in an increase in premiums for Louisiana homeowners. One study finds rates would need to quadruple for the program to stay afloat.

In fact, many experts argue that NFIP has underestimated flood risk.

Rebecca Elliott, a professor of sociology at the London School of Economics and Political Science and author of the book“Underwater: Loss, Flood Insurance, and the Moral Economy of Climate Change in the United States,” said the lack of ability to account for future risk, “has a lot to do with the fact that it is a hugely difficult and an expensive task to map all of the floodplains of the country and...keep them updated.”

The nonprofit First Street Foundation has been working to solve that problem by creating its own flood risk model. Taking scientific projections of sea-level rise, surface temperature and increased rainfall into account, its team of modelers, researchers and data scientists have calculated the past, present and future flood risk of every home and property in the contiguous United States.

Last week it released a new study based on its data, finding that 4.3 million residential homes across the country face substantial flood risk and that NFIP rates would need to increase 4.5 times to cover the current risk.

The NFIP, set up in 1968, was not built to provide protection from increased risks. The models the program uses are based on historic flood patterns, not future predictions.

Andy Horowitz, a Tulane University history professor and the author of “Katrina: A History:1915-2015,” said millions more Americans live in flood-prone areas than when the program was developed.

“And the flood risks are only becoming greater because of the changing climate,” he added.

Most Americans who live in flood-prone areas are eligible for the subsidized national flood insurance run by the Federal Emergency Management Agency (FEMA.) The agency calculates flood risk using elevation data, but experts say the agency’s maps are outdated and that climate change is posing new challenges that make it harder to predict flood risk.

Areas that historically have not been flood-prone, such as riverine communities in the Midwest, are now experiencing regular flooding, in part due to changing weather patterns and in part due to human engineering, such as dams and levees. Coastal areas are experiencing increased flooding from higher tides, heavier rainfall, and bigger and more robust hurricanes.

According to the First Street Foundation study, structures in Louisiana face some of the highest risk, with 36 percent of homes and buildings at risk of major flood damage and more than 241,000 facing substantial flood risk by 2050.

“Essentially what we're doing is subsidizing the risk of individuals that live in really risky locations that are just becoming riskier,” said, Jeremy Porter, who leads the research and development at First Street Foundation.

FEMA is currently redesigning the way it calculates risk under the NFIP. Risk Rating 2.0 will be released this October. Rates are likely to increase, and more homes will need flood insurance.

Based on his conversations with congressional researchers, Porter said, “this is going to be a risk-based pricing structure and is going to be set up so that the program is not allowed to have a shortfall.”

NFIP currently faces an annual loss of more than $1 billion because current rates are not covering the costs of claims.

Changing flood insurance rates could disrupt the real estate market. Mortgage lenders often require flood insurance when lenders purchase properties in federally designated high-risk flood zones or floodplains. If flood insurance becomes too expensive because a home is in a high-risk area, like New Orleans, home values could plummet.

“Realistically, it can't be implemented that way,” Porter said.

He expects the federal government to make adjustments to the program so the impacts on the real estate market are lessened.

Travis Lux contributed to this article. It was written in collaboration with Life Raft.

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