Multistate Lawsuit Filed Against FEMA Rate System

WASHINGTON – Ten states and 13 parishes in Louisiana have filed a federal lawsuit against Federal Emergency Management Agency (FEMA), claiming that the agency’s new Risk Rating System 2.0 fails to take important factors into account and is pushing the cost of National Flood Insurance Program (NFIP) premiums to heights that will discourage coverage.
Louisiana Attorney General Jeffrey Landry went so far as to call Risk Rating System 2.0 “a natural disaster of its own.”
New Jersey is not one of the states that are parties to the litigation, but the results of the action could certainly have an impact on Garden State flood policy holders.
Advocates of the FEMA policy change say that Risk Rating System 2.0 increases the fairness and equity of the flood insurance program. They point to the fact that many properties are seeing decreases in policy premiums, even as others see modest increases.
The loudest voices on the issue belong to those whose policy premiums have soared, and they are the voices most heard by elected officials. In some cases, the rate increases have been hefty.
The Insurance Journal lists examples of rates in Key Biscayne, Florida, where rates are now averaging $7,000 annually. In some areas near New Orleans, Louisiana, rates moved from an average of $982 to $3,511 annually.
The Journal also reports that new rates can become issues in home sales where an existing owner with grandfathered rates sells to a new owner who is immediately exposed to the new rates.
The rating system limits increases to 18% per year, but that merely sets up a march to the new rate tier at an 18% clip per year.
FEMA recently published projections showing premiums may jump by thousands in some areas.
U.S. Rep. Frank Pallone (D-6th) has called the new system “a flawed risk model,” saying that he plans to introduce legislation to reform the flood insurance program and create “affordability measures.”
He said the rating system “unfairly targets coastal communities.”
Pallone’s office claims that approximately 12,000 policyholders have dropped their flood insurance policies since Risk Rating System 2.0 began in 2022.
The suit was filed in the Eastern District of Louisiana June 1, the start of the annual hurricane season.