CT flood insurance rates may rise in coming months

Photo of Ginny Monk
A mother and son walk past a flooded section on North Street in Stamford, Conn., on Friday Sentember 3, 2021. Around the corner at The Wescott, fire crews were still removing water that completely flooded an underground parking garage.

A mother and son walk past a flooded section on North Street in Stamford, Conn., on Friday Sentember 3, 2021. Around the corner at The Wescott, fire crews were still removing water that completely flooded an underground parking garage.

Christian Abraham / Hearst Connecticut Media

Thousands of Connecticut residents are likely to see flood insurance premium increases in the coming months as the Federal Emergency Management Agency implements a new system for calculating rates.

FEMA estimates show that 63% -- just over 22,000 -- of National Flood Insurance Program policy holders in Connecticut will see monthly rises in their premiums. The most common increase is predicted to be up to $10 per month, according to preliminary FEMA data.

The new system, called Risk Rating 2.0, began Friday. It will first be instituted for new policyholders, and existing customers are set to see new rates in April. Federal law caps increases at 18% per year.

The National Flood Insurance Program typically covers up to $250,000 for the structure of a residential property and $100,000 for the contents.

Risk Rating 2.0 aims to make charges more equitable and evaluates more factors to determine flood risk to a property than the old system. The system uses factors such as historical flood records, flood type, distance to water source, cost to rebuild and other property characteristics such as elevation.

Nearly 35,000 Connecticut policy holders will be affected by the change, and 37% will see decreases. Just over 80 will have increases of more than $100 per month, according to FEMA data.

“It’s a major shift, it’s almost going to what I’m going to call what a normal insurance company would do,” said Diane Ifkovic, Connecticut’s state National Flood Insurance Program coordinator. She added that it’s been more than 50 years since the algorithm has been changed.

Experts also said the change is a step to help the flood program get out of billions in debt, partially built up from years of underestimating the cost of flood damage that’s only been exacerbated by climate change.

“Through Risk Rating 2.0 FEMA is able to deliver rates that are actuarily sound, equitable, easier to understand and better reflect a property’s flood risk,” a FEMA spokesperson wrote in response to questions from Hearst Connecticut Media. “Currently, policyholders with lower-value homes are paying more than they should and policyholders with higher-value homes are paying less than they should. Risk Rating 2.0 corrects this inequity.”

But several members of Congress -- both Democrats and Republicans -- have asked that implementation be delayed, citing concerns with lack of training and lack of affordability. In late September, 38 representatives and nine senators signed letters requesting the delay. None of Connecticut’s delegation signed either letter.

Connecticut’s Sen. Richard Blumenthal said in a statement he supports a delay in fully implementing the program so that Congress can “carefully review the real-world impacts of the new program.” Blumenthal added that the program’s intention was to improve payment equity in the face of climate change.

“At a time when many residents are struggling to recover from the financial hardships suffered during the COVID-19 pandemic and given the high number of homeowners that will see rate increases, FEMA should delay fully implementing the program until Congress can thoroughly evaluate the agency’s plans,” Blumenthal’s statement read in part.

Sen. Chris Murphy’s office didn’t respond to requests for comment. Neither did Reps. Joe Courtney or Rosa DeLauro’s offices. Rep. Jim Hime’s spokesperson declined to comment, citing a busy schedule.

The Senators’ letter also mentioned concerns that as many as 900,000 homeowners will drop out of the program over the next 10 years because of higher rates.

Ifkovic said she also has some concern that Connecticut homeowners who have paid off their mortgages and aren’t required by lenders to have flood insurance will forgo the option altogether, given the increase.

“You might say, ‘Well, I really need it’ or you might say, ‘Well I’ll take my chances,’” Ifkovic said.

Ifovic added that when people are in doubt, she’d encourage them to get flood insurance to cover risk.

“We are committed to closing the insurance gap and reducing disaster suffering by increasing the number of disaster survivors that are insured,” the FEMA spokesperson said. “Insured survivors are more resilient and recover much quicker following a disaster.”

Ifkovic said she suspects some inland areas may see the most decreases. Many drops may be based on the cost to rebuild a home, experts said.

“If your house is only worth $100 grand or your house is worth $500 grand, that’s factored in there now too,” Ifkovic said. “So that’s the equity part of it, if you’re lower income versus higher income, about the property, so that’s some of it too.”

FEMA estimates show that certain zip codes in Fairfield, Stratford and Old Saybrook will have some of the most policyholders with the largest monthly rate drops.

Some areas of Westport, Willimantic and Hartford are set to see among the sharpest increases, according to FEMA projections.

The old system for decades has underestimated the cost of flood risk, experts said.

Research from New York-based nonprofit First Street Foundation predicted that for residential properties with up to four units, the average expected annual loss per property was $4,063 in 2021; the nonprofit projected that the average loss would grow to $5,226 for the same properties in 2051.

The areas with the largest growth in economic loss from flooding were projected to be Milford, Stratford and Norwalk, according to the report.

“We found on average 4.5 times more economic risk than what FEMA is pricing for,” said Jeremy Porter, head of research and development at First Street.

Risk Rating 2.0 addresses some of these concerns, but the floodplain maps -- which most mortgage lenders use to determine whether a buyer must purchase flood insurance -- still don’t show the full risk, Porter said.

In recent years, Connecticut has seen more flooding from small tributaries, creeks and street flooding from overwhelmed drainage systems. Tropical Depression Ida, which caused widespread flooding through the state in early September, was a prime example of this type of flooding, Ifkovic said.

“We had a lot of flooding in areas that were not mapped floodplains,” she said. “That’s just basically urban drainage, poor drainage, overwhelmed storm drains, that kind of thing.”

And because of climate change, flooding events are occurring more often, experts said.

“They [FEMA] are essentially fixing a program that is broken because of the realities of climate change,” said Nick Vin Zandt, a Senior Research Analyst and Insurance Expert at QuoteWizard. “We are seeing 100 year floods every five or 10 years.”

Over time, people may begin to see larger increases, making it harder to afford to live in flood prone areas, Vin Zandt said.

“That’s kind of one of the big questions that we have kind of moving forward is that can you get to a place moving forward where people can’t afford the flood insurance?” he added.

But the increases will likely make the flood insurance program more fiscally solvent, Vin Zandt said.

The program has been in debt for years, Porter said. Congress forgave $16 billion of the debt in 2017, but as of 2020, about $20.5 billion in debt still remained, according to a publication from the Congressional Research Service.

While Ikovic said many details about how the factors will be weighted and calculated remain unclear, Risk Rating 2.0 should present a more personal way of measuring flood risk for homeowners.

“Really before they would map what flood zone you are in and the elevation of your floor. Now it seems it’s got maybe 10 things that they’re looking at to try to capture each property’s individual risk,” she said.