On Sept. 30, 2016, new Federal Emergency Management Agency (FEMA) Flood Insurance Rate Maps (FIRMs) became effective for the city of New Orleans (Orleans Parish), impacting more than 82,000 properties. Of the affected properties, over 97 percent (or more than 80,000) were removed from the Special Flood Hazard Area (SFHA). In terms of land area, the percentage of the parish in the SFHA was reduced by nearly a quarter to 63 percent of the parish.
The immediate impact of these new maps is to make flood insurance purchased or renewed under the National Flood Insurance Program (NFIP) more affordable for a number of home and business owners.
The previous FIRMs published by FEMA for Orleans Parish were issued March 1, 1984, and were based on analysis of the rainfall ponding areas within the levee systems at that time, possible flooding effects from the Mississippi River, and the impact of storm surge from the Gulf of Mexico. These maps depicted approximately 85 percent of the geographic area of Orleans Parish as being within the SFHA.
Following the devastating impact of Hurricane Katrina in 2005, FEMA worked with parish officials and the Army Corps of Engineers on preliminary mapping, which was subsequently revised following the design and construction of the Greater New Orleans Hurricane and Storm Damage Risk Reduction System (HSDRRS). The HSDRRS was funded at $14.45 billion and fortified the 133-mile greater New Orleans perimeter system, including levees, floodwalls, pump stations, and surge barriers that protect Orleans and four other neighboring parishes that are subject to coastal storm surge, river flooding, and rainfall events. The updated Orleans Parish flood maps, as well as the flood maps under development for Jefferson, Plaquemines, St. Bernard, and St. Charles parishes, reflect the impact of this project. A recently published story map provides a visual comparison of the previous Orleans Parish map and the new flood map. The detail highlights more than $13 billion in reconstruction cost value of single-family residential properties affected by the changes.
However, New Orleans faces additional challenges not directly addressed by the HSDRRS. Coastal subsidence, rapidly disappearing wetlands, and invasive species make this area particularly vulnerable to climate change and exacerbate flooding risk and damage to the HSDRRS through exposure and erosion. These risks are being addressed by the Coastal Protection and Restoration Authority (CPRA), which is tasked with “coordinating the local, state, and federal efforts to achieve comprehensive coastal protection and restoration.” Formed in 2005, the CPRA released a highly praised master plan in 2012 that includes a section focused on reducing coastal flooding through land reclamation, protecting and restoring wetlands, and nonstructural measures, such as ordinances and building codes with higher risk-reduction standards.
The city of New Orleans also is a member of “100 Resilient Cities,” a program pioneered by the Rockefeller Foundation. The resilience strategy developed by the city addresses environmental issues and disaster preparedness in conjunction with social equity and received a 2016 National Planning Excellence Award for a Best Practice from the American Planning Association.
A common thread woven throughout all of these programs to protect and restore New Orleans is the need for individual homeowners and business owners to secure and maintain flood insurance in order to further reduce the risk from all types of flooding events. If a loan is secured through a federally regulated lender or federal agency lender by a structure in an SFHA, federal law mandates the lender to require flood insurance. It’s important to note that all mortgage lenders, at their discretion, can require flood insurance on properties not in SFHAs, as well.
A comparison of the previous and revised Orleans Parish FIRMs also reveals that the new maps display greater detail. As a result of enhanced mapping techniques that are now available, the new FIRM contains additional individual panels providing a more granular level of mapping. A close-up view (Figure 1) shows that, in some cases, only a part of a parcel may be in an SFHA. Flood determinations prepared for mortgage lenders to set federal flood insurance requirements are based on the structure’s location within the parcel, so even if a portion of the parcel is in an SFHA, the actual structure may be outside the SFHA. This valuable information may be helpful to lenders, especially those with a considerable New Orleans portfolio, when making risk management decisions beyond the regulatory requirements.
It is important to recognize that even homes and businesses located in medium- and low-risk areas (areas outside of the SFHA) are still subject to flooding as demonstrated by the recent flooding disaster in Baton Rouge and surrounding south central Louisiana communities. With the Weather Channel registering over 24 inches of rain falling in some areas, flooded waterways inundated homes and businesses well outside the mapped SFHA. FEMA reports that 20 percent of all flood claims nationally are filed on policies for properties outside of mapped high-risk flood areas and these property owners receive one third of federal disaster assistance for flooding. Notably, the National Climate Assessment reports an expectation that more intense downpours in shorter periods of time, such as those that recently occurred in Louisiana, will become more common, leading to more flash flooding and damage in the Gulf states area.
With the release of updated flood maps and the potential for more intense and more frequent rain events, New Orleans’ city and parish officials may be considering what other communities or states are doing to communicate risk to property owners. The California Department of Water Resources recently mailed notices to 280,000 property owners in 17 of the state’s central valley counties. The property owners, whose properties are located behind a levee and may be mapped outside of the SFHA, were reminded through this notice that there is a risk of flooding regardless of flood zone or the level of flood protection. Among the measures property owners were advised to take is to purchase flood insurance.
While the cost of flood insurance varies based on the flood zone in which a property lies, there are a number of other factors affecting the cost that can cause variations in premiums even within the same flood zone. The following factors can impact the cost of flood insurance:
- Year of construction.
- Building occupancy.
- Number of floors.
- Presence of a basement.
- Location of the contents within the structure.
- Location of the lowest floor in relation to the base flood elevation on the flood map.
- Deductible and amount of building and contents coverage selected.
Generally, premiums for structures located within SFHAs are higher than those for structures not in an SFHA. But depending on the factors listed above, it is theoretically possible that a home or other structure built high above the base flood elevation, yet in an SFHA, might be rated with a premium less than a similar structure that is not in the SFHA. Property owners in Orleans Parish should talk to their insurance agents about their current circumstance and what impact the new maps will have. This is particularly important for property owners located in low flood risk areas since the cost of flood insurance compares favorably to the cost of repaying even a low-interest disaster loan after an unexpected flood loss.
For properties that are no longer located in an SFHA, the cost of flood insurance will very likely decrease. For owners in Orleans Parish with properties that are newly located in an SFHA, NFIP has a “Newly Mapped Procedure,” which may provide some initial savings on flood insurance and also a grandfathering process that may help some property owners preserve their prior flood zone rating.
NFIP has over 5.1 million policies in force across more than 22,000 communities in the U.S., and total flood insurance claims averaged $1.9 billion per year between 2006 and 2015. NFIP, which receives its authority to issue policies and pay claims from Congress, must be reauthorized by Sept. 30, 2017, through congressional action. Legislation aimed at reforming the program or expanding the market for private flood insurance issued outside NFIP is pending or expected to be introduced.
The city of New Orleans, and the greater New Orleans area, has made tremendous strides in the recovery from Katrina and preparations for future weather events. The hope is that, with the implementation of the new FIRMs in Orleans Parish, the community and its residents will embrace lower-cost flood insurance coverage while continuing to be mindful of other personal and policy decisions that protect life and property against the risk of flooding.