Some 425 St. Charles Parish residents have already dropped policies
When it comes to insurance, the catastrophe can linger long after the devastation and such is the case with rising flood insurance rates in St. Charles Parish, as well as the nation.
“The increases are prompted by the catastrophic events Katrina, Rita and Sandy,” said Earl Matherne, the parish’s coastal zone manager. “Quite simply, these three events are the largest payout events in the flood insurance program’s history. Congress reacted to the billions in payouts by raising rates.”
Matherne said residents should anticipate a $25 surcharge for a trust fund for catastrophic events and paying off past catastrophic events will add another $25 to primary residential structures and $250 to all others (rentals, commercial, industrial).
Parish residents pay $772 a year on average for flood insurance, although he said this figure includes all commercial and industrial policies. Matherne said the parish had 11,489 policies with premiums totaling $8.8 million covering $3.2 billion in assets as of this year.
“What is more concerning is that we have 425 fewer policies in St. Charles Parish than we did three years ago,” he said “While a 3.5 percent reduction in policies isn’t bad, you have to factor in all the new policies written for new homes that do have flood insurance.”
According to Matherne, the concern is how many owners simply dropped their policy from the threat of severe changes.“The object for the rest of the rate increases is to approach actual costs of the program,” he said. “For now, we only know that regular rates can increase only 18 percent per year and that they should not (that is how the federal legislation reads) exceed 1 percent of the value of the structure being insured.”
Locally, the largest potential source of increase is the pending flood map changes, Matherne said.
“After Katrina specifically, FEMA became very wary of showing levees on their flood maps,” he said. “Some levees in the parish do not qualify to be included. The areas behind levees that had been shown as protected from major flooding on the 1983 and 1992 flood maps are now shown as being vulnerable on the proposed new maps. Therefore, the cost to insure them is greater.”
Who will be affected by the rate increase is what Matherne called “a moving target.”
The parish is involved in the Levee Analysis and Mapping Procedure (LAMP) that looks at non-accredited levees that existed on older maps to determine their actual effect on flooding, he said.
LAMP should redraw the maps, but that is an ongoing process, which will not likely produce even draft maps for another year.
In addition to LAMP, Matherne said there are parts of the proposed map that are incorrect, and the parish has submitted new data to correct it.
“Things like ground elevations and culverts that aren’t shown will change the maps once they are included,” he said. “But again, we don’t have new maps to estimate that change and will not have them for a while. Further, there are adoption options that we have yet to explore with FEMA that could create negative effects in some areas for years.”
Rates are likely to again increase in some areas while decrease in other area when the new maps are adopted.“Most of the East Bank and all of Ama already have a new levee, yet their flood insurance rates will not reflect that until the new maps are adopted,” Matherne said.
East Bank residents already pay the highest flood insurance rates, although they should fall when the new maps are adopted.
“Once those maps are adopted, the highest rates will be in those areas whose levees are no longer reflected on the map,” he said. “In other words – those losing their X zone. Those areas would primarily be Des Allemands, Paradis, Bayou Gauche and Mimosa.”
The Biggert-Waters Act of 2012 (BW12) and Homeowners Flood Insurance Affordability Act are also affecting insurance rates. BW12 eliminated the grandfathering clause on property and rates.
“When the actual dollar amounts were released, some homes in St. Charles Parish would have been paying more than $28,000 per year for flood insurance,” said Matherne of a bill that sent a parish coalition to Capitol Hill and helped get the Affordability Act passed. It restored the grandfather clause, which meant the homeowner was accountable for requirements at the time the house was built.
“Folks losing their X zone will still see an increase from about $400 to about $1,300,” he said. “While this is not as bad as before, it is still pretty drastic. However, the rate can only go up by 18 percent per year, and there is a two-year grace period before the increases start after new maps are adopted. Add to that the 2017 expiration of the entire program and congressional reauthorization, and it’s hard to look too far into the future.”
Short term, the parish is helping homeowners go through their bills to ensure they are rated correctly, not paying the $250 surcharge on their primary residence and updating them on policy changes that could lower premiums.
From there, the parish is participating in LAMP to update proposed new maps, he said.
“Long term, we are building levees and working with our congressional delegation on the 2017 The National Flood Insurance Program (NFIP) reauthorization,” Matherne said.
At this point, the only certainty related to flood insurance premiums is they will rise. Even without changes to the maps, premiums are being raised nationwide to cover rising program costs.
NFIP is more than insurance, he said. The program pays for the development of the maps used to administer the program, it pays for programs to help reduce and mitigate future flood damages and it pays for all of the federal folks who help put it together.
The original NFIP was created in 1968 because private insurance realized it could not write flood insurance and make money or even break even, he said. Matherne added it has taken a long time for the federal program to reach the same conclusion.
“I think we all need to keep in mind that rising premiums for flood insurance is a national issue,” he said. “All of the coastal states are being affected the same way. Interior states see large events like Katrina, Rita and Sandy and feel as if they are paying to subsidize insurance for people living in vulnerable areas. Flooding is a risk nearly everywhere in this country.”