Government shutdown sparks plea to White House to delay flood insurance rate increase

The effort to delay and minimize an expected increase in flood insurance rates is shifting to the White House since legislative action is stalled during the ongoing government shutdown.

Greater New Orleans Inc. President and CEO Michael Hecht said Tuesday the coalition to enact change in the National Flood Insurance Program is asking the Obama administration to delay some of the rate hikes that began being phased in this month.

“The shutdown has completely stalled the legislative effort, but it has not stalled the implementation (of the rate hikes),” Hecht said.

Last week, the coalition sent a letter to the House committee leaders asking to keep flood insurance affordable.

The letter was signed by 109 business and civic associations nationwide, including the U.S. Chamber of Commerce, the American Bankers Association and the National Association of Home Builders.

The letter came in advance of a planned House congressional hearing Wednesday on the NFIP. But that hearing, as well as another flood insurance symposium last week, was indefinitely postponed because of the shutdown.

Hecht said the hope now is the administration will agree to delay some of the rate hikes temporarily, just as the employer mandate in the Affordable Care Act was delayed a year.

The administration could rule that the rate hikes not be implemented until the Federal Emergency Management Agency finishes an affordability study into the effects of the premium increases, he said. FEMA has indicated the affordability study is far from completion and that the funding is currently not in place to finalize it. Hecht said it was “clearly the spirit” of the law to finish the study first.

The flood insurance program was revamped last year by Congress to make the program more financially self-sustainable. Some changes amount to phasing out a status that allows properties built decades ago to be grandfathered into the flood insurance system at much lower rates.

Louisiana lawmakers specifically want to change some rates impacting grandfathered properties and a trigger that allows rates to jump suddenly to unaffordable levels when homes are sold in some areas.

Rep. Steve Scalise, R-Jefferson, said he supports the effort to reach out to the White House. “The president should give a delay,” he said.

The rate increases begin being phased in this month apply to some homes and businesses built prior to the first 1973 federal flood maps.

The Oct. 1 trigger applies to properties — businesses, secondary vacation homes and homes that have been repeatedly flooded — that were grandfathered into artificially lower premiums for flood insurance before flood maps were created. Such impacted policyholders will see 25 percent annual premium increases over a few years.

But such subsidized properties sold after July 6 last year when changes in the law first began will not have their new rates phased in.

That is because the rates for such subsidized residences are triggered all at once when a home is sold or the flood insurance policy lapses.

About 18,000 Louisiana policies will see immediate impacts as non-primary residences, businesses and repetitive-loss properties built before the flood maps.

Another 50,000 or so primary residences from before the 1973 flood maps are not impacted until they are sold or the policy lapses, according to FEMA.

However, many more policyholders currently not listed in high-risk flood zones will see rate hikes in a year or more as new flood maps are finalized. More properties will be listed in higher risk flood areas in updated maps as homes lose their grandfathered statuses.