How will the FEMA flood insurance pricing overhaul affect Delaware homeowners?

FEMA is rolling out a new pricing system for flood insurance on Friday, designed to better reflect actual risk. Many Delawaren will save money first, while others will pay more.

The National Flood Insurance Program (NFIP) ‘s new rating system called “Risk Rating 2.0” incorporates more factors to determine a property’s risk of flooding. It aims to increase equity taking into account reconstruction costs.

More than a third of Delaware’s current policyholders will see their rates drop in the first year, according to data released by FEMA. More than half will see rates stay the same or increase by less than $ 120 a year, which the agency says is comparable to the average annual increase under the old rating system. But more than 10%, or nearly 2,800 insured, will see increases of more than $ 120 per year.

Several communities, including some on the Delaware coast and in Wilmington, will see a greater portion of the rates increase.

“I think Risk Rating 2.0 will send a better price signal on what it costs to live near the coast,” said Phil Barnes, a political scientist at the University of Delaware’s Institute of Public Administration, specializing in in climate resilience.

Experts say the new pricing system could threaten home values. The new tariffs could potentially cause people to move away from flood-prone areas or cause developers to think twice before building there, Barnes says. He adds that it could improve coastal resilience in places like growing Sussex County.

Even though her zip code will see more policies increase by over $ 120 a year than any other in the state, Bethany Beach Mayor Rosemary Hardiman says the numbers aren’t as bad as she feared.

“It is true that there will probably be huge increases for some properties,” she said. “I’ve seen articles focused on these huge increases. … Of course you start to think, what’s going to happen? But when I saw the number of increases from $ 0 to $ 10 per month, or $ 120 per year, and the much larger number of people affected by that, I didn’t think it was that great. [an impact] as I expected.

Figures released by FEMA only reflect the first year of rate changes. The agency can’t increase homeowners’ rates by more than 18% per year, and The New York Times reports that the initial increases may reflect only a fraction of the eventual costs.

“Climate change is here,” Hardiman said. “You don’t know how things are going to affect the city over the years.”

Hardiman says Bethany Beach is trying to keep flood insurance affordable by participating in FEMA’s Community Rating System, which rewards municipalities that pursue education and resilience projects with discounts for residents. .

Increased equity

Several other Delaware municipalities participate in the Community Rating System, but the city of Wilmington does not.

About one in five households with NFIP policies in the Wilmington 19801 and 19802 zip codes will see rates increase by at least $ 120 per year under the 2.0 risk rating. This includes the northeastern neighborhood, which experienced catastrophic flooding from the remnants of Hurricane Ida earlier this month.

FEMA admits that historically, policyholders with lower value homes have paid more than their fair share of the risk, while policyholders with higher value homes have paid less. The new system should eliminate this injustice taking into account the cost of rebuilding a structure.

In the Wilmington 19801 and 19802 postal codes, about 12% and 7% of single-detached home policyholders respectively will see immediate rate cuts under the 2.0 risk rating. Barnes says he’s not surprised the rate cuts are so limited in these areas.

“Sure, they value higher value properties – you get a bigger premium,” he said. “But risk is what is rated with Risk Rating 2.0. So I am not surprised. Properties in riskier and more flood-prone areas could see their flood insurance premiums increase. “

The State Department of Insurance is not directly involved in the rollout of the 2.0 risk rating, but supports the rate reduction for some Delaware policyholders.

“The data we have shows that our state will fare better than the national average under the new system,” said Christina Haas, senior advisor to the Delaware insurance commissioner.

The new Risk Score 2.0 rates are effective October 1 for new policies. Existing policyholders with declining rates can benefit from these savings when they next renew. The increased rates for existing policyholders will come into effect after April 1.

Current NFIP policyholders can contact their insurance company or insurance agent to find out their costs under the 2.0 risk score.

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