WASHINGTON – U.S. Senator Bill Cassidy, M.D. (R-LA) today delivered a speech on the Senate Floor blasting President Joe Biden and his administration for implementing rate hikes on new National Flood Insurance Program (NFIP) policyholders and making existing policies unaffordable for some homeowners.
“Congress never passed a bill requiring that FEMA implement this. President Biden could have stopped it, he alone was responsible. He should have asked FEMA to delay implementation of Risk Rating 2.0 or reconsider altogether,” said Dr. Cassidy.
“This isn’t a Louisiana issue. Risk Rating 2.0 applies nationwide and will impact those living on all our coasts. There are bipartisan, from both parties, calling for the administration to halt Risk Rating 2.0,” continued Dr. Cassidy. “At the end of the day flood insurance must be affordable and accessible for the homeowner, accountable to the taxpayer, and sustainable for the future.”
Cassidy and Senator Bob Menendez (D-NJ) led a bipartisan group of colleagues urging FEMA to delay Risk Rating 2.0 last month. The non-partisan Congressional Budget Office projects that 900,000 policyholders (nearly 20% of program) will drop NFIP coverage as a result of Risk Rating 2.0.
Cassidy’s speech as prepared for delivery can be found below:
Today is Wednesday, October 6, 2021 and Risk Rating 2.0 has officially been in effect for 5 full days.
What is Risk Rating 2.0? It’s a new rating system for the National Flood Insurance Program (NFIP) that will increase premiums higher than sustainable for homeowners and therefore higher than is sustainable for the program.
In Louisiana 80% of policyholders will see increases in the first year. For some premiums may become unaffordable and could collapse the value of their home.
In light of recent storms, it’s important now more than ever we look at NFIP. Folks in Louisiana, and many policyholders, are recovering from hurricane damage.
Congress never passed a bill requiring that FEMA implement this. President Biden could have stopped it, he alone was responsible. He should have asked FEMA to delay implementation of Risk Rating 2.0 or reconsider altogether.
FEMA has not only been slow to share information with policyholders, they have been misleading Congress – hiding the true consequences of Risk Rating 2.0. They are not being upfront about the costs in the outyears.
They said they would inform new policyholders of Risk Rating 2.0 premiums by August 1, 2021. They missed this deadline. This information didn’t trickle down to homeowners and insurers until September 2021. Many are still waiting for a better understanding of this rating system that is now live and in use.
In 2019, we reached out to the administration and were able to successfully delay implementation of Risk Rating 2.0. This time around, and with a new administration, we are not as lucky.
Let’s take a look at a quote from a middle-class family in Lake Charles, Louisiana who does not (I repeat does not) live in a flood zone. They currently pay $572 for flood insurance on a single-family home that’s approximately $250,000. The quote he received under Risk Rating 2.0 raises his policy ten-fold to over $5000.
Now rate increases are capped to 18% annually so they won’t be shelling out five grand next year. With progressive increases over the years, this homeowner may drop their coverage as it will quadruple in price over the course of a decade.
This demonstrates the death spiral that is Risk Rating 2.0.
Analysis from the non-partisan Congressional Budget Office (CBO) estimates that roughly 900,000 policyholders, or one-fifth of all policyholders, will drop out of the program of the next ten years.
Many policyholders are required by law to pay for insurance. FEMA has put them in an even worse situation. As people choose to drop out of the program due to increased premiums from Risk Rating 2.0, FEMA will force price increases on homeowners who are subject to the mandatory purchase requirement. They will face the difficult task of coming up with thousands more for insurance or losing their homes.
This will end with 900,000 people losing their insurance coverage and Americans losing their homes. It’s hard to imagine an empathic man like President Biden allowing such a policy to move forward.
Now there are a couple criticisms of the program. Frankly, they’re unfounded.
One, these are millionaire’s vacation homes. That’s factually not true if you look at the data. When CBO looked at samples of home values in the program, it ranged from $220,000 to $400,000. In my home state of Louisiana, these are middle-income and working families. They are folks trying to make ends meet and suddenly they’re no longer able to protect themselves. They are not millionaires. These are not vacation homes on the beach.
Looking specifically at Risk Rating 2.0 data shows who will see rate hikes. It’s bad news for South Louisiana where rates for almost everyone will increase.
Two, the program is subsidizing folks who suffer repetitive flood damages. This argument is “mitigated” by offering mitigation. Data shows mitigation is a good deal for the taxpayer. According to the National Institute of Building Sciences, for every $1 spent on federal mitigation grants, it saves an average of $6.
In the Infrastructure Investment and Jobs Act, there is $3.5 billion in Federal Mitigation Assistance grants. These grants would go towards properties that have experienced repetitive losses. It would shore up the program that protect high-risk properties.
Now we can have a conversation about this criticism in the future if mitigation opportunities are offered to homeowners and they are declined. But people don’t want to live in homes that flood all the time. I think we would see very few people decline.
Finally, some argue that private insurers should replace the Federal program. Let’s be realistic, private insurers will not replace the NFIP. I do support expansion of the industry as consumers should have options.
If nothing else, this highlights the need for a long-term fix to the program. In the past, I proposed reforms to ensure the program is affordable and accessible for homeowners, accountable to taxpayers, and sustainable with Senators Menendez and Gillibrand.
This isn’t a Louisiana issue. Risk Rating 2.0 applies nationwide and will impact those living on all our coasts. There are calls, from both parties, for the Biden Administration to halt Risk Rating 2.0.
This Congress, I will continue to work to reform NFIP. In addition to the tenets of affordability, accessibility, accountability, and sustainability, there needs to be an emphasis on supporting prevention and mitigation efforts to avoid costly damage from flood disasters.
At the end of the day flood insurance must be affordable and accessible for the homeowner, accountable to the taxpayer, and sustainable for the future.
With that, I yield back.