Commentary

printed 10/08/2021

It’s not often that the actions of federal government makes sense, at least not in recent years, but FEMA’s re-tooling of its flood insurance rate structure is based on a good argument.

Ever since 1968 and the advent of federal flood insurance, give or take several amendments over the years, the rates charged for the plan were about the same for everyone, regardless of the their location’s level of risk.

As the Washington Post reported this week, policyholders in the middle-income bracket were helping to subsidize the rich, as owners of homes in the mid-level price range were paying for more insurance than they needed to help cover the cost for mansions that were underinsured.

Three other circumstances have been playing a role in FEMA’s rate structure overhaul: the program is drowning in debt from payouts to areas hammered by particularly violent hurricanes; the administration wants to end the government subsidies that have kept rates artificially low for years; and climate change.

There’s no denying that hurricanes are becoming more frequent, just like there has been more catastrophic flooding from seemingly endless rainstorms. As for the climate change theory, people can believe it or not, because what matters is whether insurance companies believe it, and they do.

Ocean City and other coastal communities are in the midst of planning for FEMA’s new pricing structure based on what’s called Risk Rating 2.0. City officials and departments are working on standards that will address some of the concerns that FEMA will be applying to its formula.

The “freeboard” discussions — the area on a structure between the ground and the structure’s occupiable space — are part of that. Resort government’s aim by imposing this standard at some point is to produce a reduced risk rating to shield the community as much as possible from whatever action FEMA decides to take.

It all makes sense from a purely logical standpoint, but it is going to take some getting used to, as flood insurance policy holders, and those who intend to be, will find out soon enough.

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