The Insurance Program Will Be More Fair With FEMA’s New Approach to Flood Risk



The National Flood Insurance Program (NFIP) will be modernized by the Federal Emergency Management Agency (FEMA) to make it more equitable and sustainable. This week, FEMA released further information about Risk Rating 2.0.


The new methods for estimating flood danger evaluate individual risks and replacement costs for properties rather than just whether they are located in a “flood zone” as defined by FEMA.

According to FEMA officials, this would put an end to a system in which insurance for high-value properties is essentially subsidized by low-value homes.


Despite worries that Risk Rating 2.0 would result in significant premium increases, NFIP Senior Executive David Maurstad stated that 23% of policyholders will experience “immediate decreases,” 66 percent will experience a “average of zero to $10 a month” in premium increases, and 11% will incur higher costs, some of which exceed $20 a month.


Following a string of disasters that resulted in claim costs higher than the premiums FEMA received, NFIP owes the U.S. Treasury $20.5 billion.



The new strategy will produce a “more egalitarian, accurate and personalized NFIP,” according to Maurstad, who added that “our current system is just fundamentally not working for us anymore.”


Politicians in coastal states like Florida were concerned about the rapid effects of higher rates on their citizens, which would better represent the heightened flood risk in such areas.

By limiting the application of new rates, starting in October 2021, to new policies, FEMA has allayed those worries.

Rate adjustments won’t take effect until April 2022 for homeowners and companies that already have flood insurance.


According to FEMA, the biggest increases would be seen in high-value houses in high-risk locations.

FEMA anticipates that any rate hikes would occur over a 10- to 15-year “glide path” as long as they are still covered by the law’s 18% annual cap on premium increases.


In a flash, the Union of Concerned Scientists (UCS) offered its opinion on the scheme.


Shana Udvardy, a UCS climate resilience specialist, stated that “the system we’ve used to quantify flood risk, and consequently insurance policy premiums, no longer holds water.”

“Homeowners are ill-prepared for potential disasters due to outdated maps.

Homeowners could benefit greatly from Risk Rating 2.0 by having a better understanding of their risk and being able to make wise decisions to protect themselves and their property.


The First Street Foundation, a climate and technology non-profit that has carried out its own in-depth flood mapping, is led by executive director Matthew Eby. He said: “It is excellent to see that FEMA is pushing forward with Risk Rating 2.0, which is so desperately needed.”

According to a recent First Street research, the United States is appallingly unprepared for destructive floods.