On April 1, the Federal Emergency Management Agency (FEMA) unveiled changes, commonly referred to as Risk Rating 2.0, to the National Flood Insurance Program (NFIP). Risk Rating 2.0 is meant to provide more specific, accurate information about the flood risk associated with properties covered by the NFIP.

Materials released by FEMA show that Risk Rating 2.0 will provide about 23 percent of current NFIP policyholders with an average decrease in premium of $86 per month. Sixty-six percent of current NFIP policyholders would see no change or an average of a $10 per month increase in premium. Seven percent of current NFIP policyholders would see an increase in premium of $10-$20 per month.

Four percent of current policyholders would receive a premium increase of more than $20 per month on average. FEMA said the small population seeing the largest increases include high-value homes in high-risk areas.

The changes will go into effect for new policies on October 1, 2021 and for renewals on April 1, 2022. FEMA also said that NFIP policyholders whose premiums will decrease, and who are eligible for renewal, can opt into Risk Rating 2.0 for their properties starting Oct 1. PIA is working with industry and FEMA to ensure this aspect will be workable for independent agents as they service their clients.

Risk Rating 2.0 had originally been scheduled to go into effect in 2020, but it was delayed after congressional offices expressed concerns about the potential for their constituents to be subjected to dramatic premium increases.  

FEMA’s Risk Rating 2.0 state profiles can be found here, and an overview of Risk Rating 2.0 is available here. With the Risk Rating 2.0 plan and timeline finally publicly available, PIA is analyzing the details and will provide additional analysis in the coming weeks.