Rates rising, fewer people getting coverage
It was a span any flood insurance policyholder would hope for, as just 18 claims were filed in Connecticut for reimbursement from flood damage over 12 months through this past June under the National Flood Insurance Program.
But with video of Nova Scotia structures floating away this weekend during Hurricane Fiona — and with Florida girding for Hurricane Ian’s landfall on Wednesday — Connecticut homeowners are getting a fresh reminder of the risk of going without insurance even as it gets more expensive for some.
Under the National Flood Insurance Program, nearly 31,400 policies were in force in Connecticut as of late August. Under a new “Risk Rating 2.0” methodology that assigns risk by individual structures rather than flood zones, about 46 percent of Connecticut policyholders saw their monthly premiums increase by up to $120 a month, and 17 percent more according to FEMA data. The remaining 37 percent saw premiums decline.
Flood risk and property values are the two main factors underwriters weigh in determining rates — and both have been marching upward in the past few years as the Federal Emergency Management Agency institutes new NFIP underwriting guidelines, and as the COVID-19 pandemic created a boom in home values that is now leveling off.
Congress has yet to act on a long-term extension for the National Flood Insurance Program, having kept it funded through a series of short-term reauthorizations. An industry expert told a committee in May that overall monetary inflation is taking its toll, with some NFIP policyholders dropping coverage in order to meet other needs. But he said the pricing overhaul was needed to ensure NFIP can meet the needs of future claims.
“You cannot say that the flood risk is growing and then expect the price of that risk to be cheaper — that does not compute,” stated Roy Wright, CEO of the Insurance Institute for Business and Home Safety, in comments to the House Financial Services Committee during a hearing on flood insurance. “There is no greater risk-communication tool than a pricing signal.”
As of August, Connecticut premiums averaged $1,370 annually. The combined $43 million shelled out by those policyholders provided insurance against aggregate losses of more than $8.5 billion — though the Federal Emergency Management Agency reported just $110,000 in insurance claims paid out to Connecticut policyholders over the intervening year.
If the point of very point of insurance — paying annually against the possibility of a catastrophic flood — fewer people are renewing policies in Connecticut or lining them up after purchasing a home in a flood zone. Connecticut had roughly 600 fewer policies in force between April 2021 and August 2022 under the National Flood Insurance Program, according to FEMA data.
The decline has occurred despite 2020 and 2021 being the first and third most active years on record for named storms. Over a two week span in August and early September last year, the remnants of three storms — Fred, Henri and Ida — lashed portions of Connecticut.
As of August, Milford led Connecticut for NFIP policies with about 2,150 in effect. Stamford, Fairfield and Norwalk were the next three up, with Norwalk residents paying the most in premiums at $2.6 million for about 1,700 policies in effect, averaging out to just over $1,500 a policy.
But the range of premiums facing homeowners is evident in towns with only a handful of policies, where the averages are far higher. In Stafford, 15 policyholders are averaging nearly $4,000 in annual payments, and in Harwinton three property owners are averaging just over $5,000 annually.