Triple-I Weblog | FEMA’s New Method to Flood Threat Will Make Insurance coverage Program Fairer


The Federal Emergency Management Agency (FEMA) last week announced details of Risk Rating 2.0 – their plan to modernize the National Flood Insurance Program (NFIP) to make it fairer and more sustainable.

The changes measure the risk of flooding differently – they measure the specific risks and replacement costs of real estate and not just whether they are in a “flood zone” designated by FEMA. FEMA officials said this would end a system where low-value homes are effectively subsidizing insurance for high-value homes.

Despite fears that the 2.0 risk rating would lead to huge increases in premiums, NFIP senior executive David Maurstad said 23 percent of policyholders will see an “immediate decline” and 66 percent an “average of $ 10 to $ 10 per month” additional bonuses and 11% pay higher bills, some more than $ 20 per month.

NFIP owes the U.S. Treasury Department $ 20.5 billion after a series of hurricanes that resulted in damage costs greater than the premiums received from FEMA.

“Our current system just doesn’t work for us anymore,” said Maurstad, adding that the new approach would lead to a “fairer, more accurate and more individual NFIP”.

Lawmakers in coastal states like Florida have been concerned about the sudden impact of higher rates – more specifically, the higher risk of flooding in those areas – on their constituents. FEMA has addressed these concerns by only applying new tariffs to new policies when the program goes into effect in October 2021. Homeowners and companies with existing flood guidelines will not notice a tariff change until April 2022.

FEMA said high-quality homes in risk areas would see the greatest increases. FEMA expects its rate increases to take effect over a 10 to 15 year “glide path” as they continue to be protected by a statutory 18 percent annual premium increase cap.

The Union of Concerned Scientists (UCS) quickly weighed the plan.

“The system we used to calculate flood risk, and hence insurance policy premiums, no longer contains water,” said Shana Udvardy, a UCS climate resilience analyst. “Out of date maps have prepared homeowners poorly for potential disasters. Risk Assessment 2.0 could help homeowners better understand their risk and make informed decisions to protect themselves and their property. “

“It’s great to see FEMA push the much-needed Risk Rating 2.0,” said Matthew Eby, executive director of the First Street Foundation, a climate and technology nonprofit that has carried out its own extensive floods. Mapping. A recent First Street analysis found the United States was completely ill-prepared for harmful flooding.

It was found that “about 1.7 times the number of properties represents a significant risk” compared to the FEMA flood zone designation. “That equates to a total of 14.6 million properties across the country at significant risk, of which 5.9 million property owners are currently ignorant of or underestimating the risk they are exposed to.”