The federal government is urging a federal court to dismiss a Mississippi lawsuit seeking to halt flood insurance rate hikes until an affordability study is completed.

In arguing for the suit dismissal, the Federal Emergency Management Agency (FEMA), which administers the National Flood insurance Program (NFIP), says the controversial law forcing the rate hikes, the Biggert-Waters Flood Insurance Reform Act of 2012, “does not condition the implementation of rate increases on the completion of any studies.”

The Mississippi Insurance Department, under Commissioner Mike Chaney, filed its lawsuit on Sept. 26, 2013. The state is seeking declaratory and injunctive relief preventing FEMA from implementing rate increases that began on Oct. 1 under the Biggert-Waters (BW-12) law.

Mike Chaney Mississippi Insurance Commissioner
Mike Chaney
Mississippi Insurance Commissioner

(Mississippi has since been joined by several other states, most recently by Massachusetts, whose attorney general, Martha Coakley, argues in an amicus brief that the rates being charged are inaccurate.)

Chaney claims that FEMA is in violation a statutory mandate for it to have completed a study of the affordability of the rates changes by last April.

FEMA said that the law requires FEMA to contract with the National Academy of Sciences (NAS) for the affordability study and related reports and spend no more than $750,000 on them, but that NAS told FEMA it could not do the studies within the time frame or for the dollars allotted.

FEMA also says that even if the reports had been completed, they would not necessarily lead to any different results for property owners.

“Congress did not tie the completion of any study or report to the implementation of rate increases in BW-12,” says the FEMA brief. “Plaintiff’s hypothesis that completion of these reports might affect premium rate increases in general, let alone for certain properties, requires numerous layers of pure speculation.”

The reports are to be sent to Congress, which may or may not act upon them, says FEMA.

The FEMA brief was filed Nov. 18 in U.S. District Court for the Southern District of Mississippi in Jackson.


There have been calls in Congress to pass legislation to delay the rate increases as members have heard from constituents who fear huge premium increases and damage to the real estate market due to the reforms.

Rep. Maxine Waters, D-Calif., ranking member of the House Financial Services Committee, and a principal sponsor of the BW-12 law, announced last month that Senate and House members had reached a bipartisan legislative fix that she said will assure that “changes are implemented affordably.”

However, no fix has been voted upon yet.

Some business, taxpayer and insurance groups have urged Congress not to delay the BW-12 changes.

Leaders of the Republican-controlled House Financial Services Committee said this week they are standing behind the law that was intended to put the flood insurance program on sounder financial footing despite complaints from constituents.

“We do know that there are some people out there who are going to experience higher premiums. But, you know, that was the purpose,” said Rep. Randy Neugebauer, R-Texas, who chaired a hearing Tuesday, Nov. 19, of the Financial Services Committee’s housing and insurance subcommittee.

The FEMA brief is consistent with testimony by FEMA Director Craig Fugate in September in which he said the law does not give him the leeway to halt the rate increases because they may be unaffordable for many, as some members of Congress have been asking him to do.

“I need help. I have not found a way to delay…without some additional legislative support. There is no provision for affordability in this law,” Fugate told members of the economic policy subcommittee of the Senate Committee on Banking, Housing and Urban Affairs in September.

Study Provision

BW-12 requires that the government conduct a number of studies and issue corresponding reports to certain Congressional committees. The Mississippi complaint focuses primarily on the “affordability” study and report meant to assess “methods for establishing an affordability framework for [NFIP], including methods to aid individuals to afford risk-based premiums under [NFIP] through targeted assistance rather than generally subsidized rates, including means-tested vouchers.”

To complete the study, the law requires FEMA to contract with the National Academy of Sciences (NAS) to conduct “an economic analysis of the costs and benefits of a flood insurance program with full risk-based premiums, combined with means tested Federal assistance to aid individuals who cannot afford coverage, through an insurance voucher program.”

FEMA says the law prohibits it from spending more than $750,000 from the National Flood Insurance Fund for the studies.

“All parties concluded that additional time and funding were needed to complete the full scope of work contemplated,” the FEMA brief says.

A report containing the results of the study and analysis was due to be submitted to committees of the House of Representatives and the Senate in early April, or 270 days after the enactment of BW-12, which was July 6, 2012.

Instead, NAS has proposed a two-phase approach to the analysis. The first phase would focus on the design of the analysis and the second phase would involve execution of the analysis. The first phase would be completed by March 2015.

FEMA’s brief also questions the standing of the Mississippi Insurance Department to even bring the lawsuit. It argues that Supreme Court precedent forecloses a state agency from suing the federal government on behalf of the state’s citizens to protect them from the operation of a federal law. Further, FEMA says its authority to set premiums is limited by Congress and it currently does not have the statutory authority required to implement the changes sought by the Mississippi suit.

BW-12 Changes

BW-12 calls for a number of changes including a phasing out of premium subsidies for some properties and a remapping of flood zones that in some cases will result in higher premiums and require additional owners to start buying flood insurance.

In accordance with Biggert-Waters, FEMA began phasing out subsidized premiums for all non-primary residential properties in January. On Oct. 1, 2013, it began phasing out subsidies for various grandfathered businesses, non-residential properties, and severe repetitive loss properties.

Remaining primary residences with policies in place at the time BW-12 was enacted will keep their subsidized premiums until the property is sold or the policy has lapsed as a result of deliberate choice. If the property is sold, or a new policy is purchased, after July 6, 2012, upon the renewal of the policy, FEMA said it will charge these policyholders the full-risk rate, as required by BW-12.

BW-12 requires FEMA to phase in full-risk rates over a five-year period for any property affected by a revised or updated flood maps. FEMA said it currently anticipates that implementation of this change will not begin for at least one year. Because it is not yet being implemented, this part of the law, Section 207, is not ripe for judicial review, FEMA argues.

Topics Lawsuits Flood Pricing Trends Mississippi