Insurance Costs to Skyrocket Under New Federal Flood Maps and Rules

Mayor Bloomberg, Deputy Mayor for Operations Cas Holloway, and the RAND Corporation recently released a study finding numerous gaps in the National Flood Insurance Program that will significantly increase flood insurance costs for New York City.

The independent study was commissioned by the City of New York to help evaluate current flood insurance coverage and premiums and prepare for expected rate increases due to major reforms of the flood insurance program and updates to the Federal Emergency Management Agency’s (FEMA’s) flood maps. The study found that 35 percent of property owners in the floodplain who are required to carry flood insurance today don’t have it. Under new FEMA flood maps that will be adopted shortly, thousands of new properties will now be considered in the floodplain, increasing owners' insurance premiums from an average of $430 to $5,000 to $10,000 per year.

Two changes that coincided with Hurricane Sandy are further compounding the effects of the physical damage: the overdue update of FEMA’s Flood Insurance Rate Maps and Congressionally mandated reforms to the National Flood Insurance Program (NFIP) embodied in the Biggert-Waters Flood Insurance Reform Act of 2012. The Biggert-Waters reforms are designed to phase out subsidies and grandfathering that allowed owners to insure their properties at rates corresponding to previous flood maps. New York City is lobbying for a delay of Biggert-Waters until FEMA’s affordability study is complete. FEMA, as part of the Biggert-Waters legislation, had been required to complete its own affordability study by April 2013, but that study has been delayed.

Before Hurricane Sandy, the NFIP was in the process of redrawing outdated flood maps that define high-risk areas and increasing its premiums, in order to reflect the full risk of flood damage to structures within the floodplain. The new maps, released in June 2013, reveal an expanded floodplain in New York City that includes twice as many structures in the high-risk zones; there are now about 68,000 structures in the floodplain, with 32,000 buildings added under the new maps.

When these maps are adopted, nearly double the number of properties will be required to purchase flood insurance. The new flood maps also increase the height flood waters are likely to reach in the 100-year flood (a flood with 1 percent chance of occurring in any year) by an average of 2 feet, with increases of 4 feet and more in some areas. Additional reforms will phase out rates that have been subsidized since Congress established the federal program in 1968.