Fighting climate change inequity through flood insurance? Yep, it’s a thing.

On September 10, 1965, President Lyndon B. Johnson arrived at the George Washington Carver High School in New Orleans’s hurricane ravaged Ninth Ward. The school, built just four years earlier, had become a refugee center for those affected by a Category 4 hurricane that pummeled the city the previous day and remains one of the costliest and destructive storms to ever hit the Gulf Coast.

Betsy was the first Atlantic hurricane  to cause $1 billion in damage, destroying or damaging 165,000 homes in Louisiana and killing 81 people throughout the Gulf states. 

That day, the president walked the darkened school corridors, pressing his way through hundreds of hurricane refugees seated on the floor eating cold beans and raw carrots from paper plates, according to reporting from the time.

“Many begged the president for water, which was also cut off,” noted the New York Times report, adding that the President was so moved by what he saw at the school and among the flooded streets of New Orleans, he vowed to act. 

Just over 40 years later, the high school was destroyed after suffering catastrophic damage by Hurricane Katrina and later demolished. 

By the time Johnson arrived in New Orleans in the aftermath of Betsy, he had become a champion of racial equality after signing the Civil Rights Act of 1964 and the Voting Rights Act a month before the hurricane hit. Within months of President Johnson sounding the alarm on the hurricane destruction in Louisiana, Congress convened a group to examine the inequalities created by hurricanes and other natural disasters, in particular the lack of flood insurance available for those living in high risk areas, according to FEMA.

Three years later, the National Flood Insurance Program was created.

Now, more than 55 years later, Congress’s bold plan created in the wake of hurricane Betsy is being overhauled to again confront the inequality created by the creeping toll of climate change, and to help the costly and in-debt program survive.

As of Oct. 1, the program known as Risk Rating 2.0 will be Biden’s latest initiative to further reduce the symptoms of a growing wealth gap by setting fairer rates that address the current problem of policyholders with lower-valued homes paying more than their share of the risk and those with higher-valued homes paying less, the federal organization said in an explanatory note. 

The new program will be particularly significant on the Gulf Coast, where the risk from hurricanes is greatest. 

Residents in Louisiana, Texas and Florida have the highest number of current policies, according to FEMA data. And last year, just eight counties in the three states accounted for more than half of the $1.2 billion in claims paid out. Those included Alabama’s Baldwin County, Florida’s Broward, Escambia, Miami-Dade, Pinellas and Santa Rosa, and Louisiana’s Cameron and Calcasieu parishes.

Each County is overwhelmingly white, ranging from 63.1% in Broward County to 93.2% in Cameron County. 

In short, the new equity program does away with the government’s 50-year-old system of evaluating flood risk and premiums using flood maps. Specifically, the system looked at the elevation of the property and whether it had an annual 1% chance of flooding.

That was deemed to be unfair. 

Previously, a $1 million home on Alabama’s Orange Beach might cost the same to insure as a $200,000 home in New Jersey, despite the flood risk and the cost of rebuilding or repairing being completely different.

That, according to FEMA, disadvantaged low-income homeowners. 

The new system will look at the cost of replacing the home, what type of risk is most likely: rainfall, river, or coastal flooding; and how close that property is to the source of the flooding. The biggest change is that FEMA will now factor in future catastrophic climate change, including sea level rise, drought and wildfires.

But it’s also hoped the new program will help plug the severe funding gap.

To date, the program is over $20 billion in debt despite having $16 billion wiped out by Congress in 2017.

But the financial consequences of that new system could be tough for some communities.

“The premise of it is a good start,” said Lisa Foster CFM, Floodplain Administrator, Pinellas County, Florida. “However, some of the rates that we have seen for non-waterfront, coastal areas in west central Florida are very high, higher than private rates where available in many cases. We have citizens with a diverse income base in these areas, so even with the gradual increase of 18% per year it puts financial strain on some.”

She added: “Additionally, the new rates may increase the flood insurance gap: communities where homeowners and renters choose not to carry flood insurance take longer to recover and incur a more costly disaster relief from state and federal agencies.”

Of the 5 million insured properties nationwide, around a quarter will see a decrease in premiums, about an average of $86 per month, according to FEMA. Everyone else will see an increase, which will be capped at 18% per year.

But these national averages hide some of the higher costs that will be experienced in higher risk areas.

Among the Southern states with the most policyholders, a vast majority will see increases. In Florida, which has just over 1.7 million policies, three quarters of people will see increases of up to $240 a year, with a very small percentage in high-risk areas potentially seeing far higher rates as climate change accelerates, according to FEMA.

Louisiana and Texas, with 495,000 and 768,000 policies respectively, will see a similar rate increase and decrease to Florida.

Republicans and Democrats in flood-prone states called for the new system to be delayed, pointing out that the true costs had not been fully explained by FEMA and the program would eventually become unsustainable for policyholders. 

Louisiana U.S. Sen. Bill Cassidy and his Democratic counterpart from New Jersey, Bob Menendez, both called for a halt to the new program so that it could be studied by Congress. 

The Reckon Report.
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