FEMA lawyer: Halting RR 2.0 could hurt property owners seeing lower flood insurance costs

10 states including Louisiana are suing FEMA over rising flood coverage premiums
Published: Sep. 15, 2023 at 9:29 PM CDT
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NEW ORLEANS (WVUE) - As Louisiana and nine other states fight in court against FEMA’s Risk Rating 2.0 methodology for setting flood insurance rates, a FEMA attorney warns that some Louisiana policyholders seeing rate decreases could be hurt if Risk Rating 2.0 goes away.

Two New Orleans area insurance agents spoke of what their customers are experiencing under the program.

“There’s a lot less people who got reduced rates than people who got increased rates,” said Dan Burghardt, who owns Dan Burghardt Insurance Agency.

Stephen Lovecchio is a branch owner with TWFG Insurance.

“Almost everybody is going up but it’s going up a little bit; $500 is going to $600, $600 is going to $800, $800 is going to $900 and $900 is going to $1,100 and that’ll go on for the next few years. The benefit of 2.0 is we’ve seen some of these terrible premiums, these $7,000 premiums go down to $2,000, so certain people have gotten huge rate reductions,” said Lovecchio.

The lawsuit by multiple states was brought amid rising flood insurance premiums, which plaintiffs say could cause some property to lose their homes because insurance costs affect house notes.


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Attorneys representing Louisiana in the case asked the judge to halt Risk Rating 2.0. or at the very least take other steps to help policyholders facing soaring flood insurance rates.

Liz Murrill is Louisiana Solicitor General.

“If we could freeze any further increases that would be great. There are things FEMA could do; frankly, FEMA could have done those things voluntarily,” she said.

Lovecchio commented on the idea of stopping Risk Rating 2.0.

“The question would be, what are you going to go back to?” said Lovecchio. “So, there’s been eight different programs since I have been writing business.”

The judge is still weighing the motion to block Risk Rating 2.0 which took effect in October 2021.

“Well, I don’t know how they’re going to do that. At some point, you have to base the rate on what the risk is, so that’s what, we have to assume that’s what they did, now you can disagree on how exactly they came up with it but they had to have some type of methodology, so if you throw that out then it’s not really insurance anyway, so they have to base it on something,” said Lovecchio.

Burghardt thinks FEMA set homeowners up and is now changing the rules.

“Now that we all own these homes they kind of led us into a slaughterhouse where now they want to raise these rates that they subsidized all these years and made possible for people to buy houses and grow this city and now they are reneging,” he said.

FEMA maintains that Risk Rating 2.0 is more equitable because premiums are based on the flood risk for individual homes.

A FEMA spokesperson issued the following statement to FOX 8 for this story:

“FEMA is now aware that due to the limited number of data points that FEMA utilized in the determining legacy premium rates, there were a number of inequities that existed within the program. Policyholders with lower value homes were subsidizing policyholders with higher value homes, and some policyholders living in areas subject to lower flood risk were subsidizing these living in areas of higher flood risk.

With the use of catastrophe models and relevant property-specific data points, such as replacement cost value of the specific property, FEMA is able to more equitably distribute the premiums and address the unfair cross-subsidization in legacy rates. FEMA uses the catastrophe modeling to help determine which additional data points (such as replacement cost value) should be considered to determine a property’s flood risk. This allows FEMA to more equitably distribute premium among NFIP policyholders based on the expected flood losses of the property. Under the legacy rating, FEMA would have increased premium rates for every policyholder within a broad rate category indefinitely, regardless of whether the actual risk of flood to the property warranted such an increase. "

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