Will FEMA insurance changes make developers more aware of flood risks?

On Oct. 1, the federal government made major changes to the National Flood Insurance Program over howls of protest from members of Louisiana’s congressional delegation. The new system, which the Federal Emergency Management Agency calls Risk Rating 2.0, will increase flood insurance costs for many high-risk properties.

The feds hope the changes will encourage developers and homebuyers to show more concern about flood risk, but so far, they’ve only created controversy. 

Under the NFIP, FEMA was supposed to subsidize insurance for older structures that predated its Federal Insurance Rate Map while working with communities to make sure they didn’t build in flood-prone areas, says Jeff Albright, CEO of the Independent Insurance Agents & Brokers of Louisiana.

“NFIP has failed miserably at that job,” he says. “The flood maps keep changing, and the flood maps frequently have been wrong.”

Now, FEMA is changing the rules. And while annual increases are capped at 18%, those hikes can add up over time.

“Some people are going to have flood premiums they can’t afford on properties they own,” Albright says. “What happens to the bank that has a mortgage on the property? What happens to (real estate agents) who want to buy or sell properties but now it’s difficult to buy or sell them because the cost of flood insurance is as much or more than the mortgage?” 

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