FEMA’s Risk Rating 2.0 Framework Will Alter Flood Insurance Rates


The Federal Emergency Management Agency (FEMA) today released new details outlining the implementation schedule for Risk Rating 2.0, an initiative to transform the National Flood Insurance Program (NFIP) program to make it more consumer friendly and better reflect the actual risks properties face.

In November 2019, NAHBNow reported that FEMA deferred the implementation of this initiative. While FEMA had originally intended to implement the program effective Oct. 1, 2020, the implementation was pushed back one year to Oct. 1, 2021.

The new Risk Rating 2.0, framework changes the way FEMA rates a property’s flood risk and prices flood insurance. In particular, the calculation will examine structure-specific factors and risks beyond whether or not a structure is located within a Special Flood Hazard Area on a Flood Insurance Rate Map, such as distance to flooding source, building elevation and the cost to rebuild the home. As a result, some rates will go up and some will go down.

In a briefing held yesterday in anticipation of this announcement, FEMA staff noted that based on its calculations of NFIP insurance rates for current policy holders across the nation, FEMA expects, on average:

  • 23% of current policyholders will see immediate premium decreases of an average of $86 per month
  • 66% of current policyholders will see increases of $0-$10 per month
  • 7% of current policy holders will see increases of $10-$20 per month
  • 4% of current policy holders will see increases of $20 or more per month (reportedly primarily high value homes in high risk areas)

FEMA also stated that builders will be able to mitigate/reduce the cost of flood insurance for the homes they build within the floodplain if they follow certain building practices.

FEMA is taking a phased approach to the implementation of Risk Rating 2.0. The first phase will take effect Oct. 1, 2021, and apply the new rating methodology to all new policies purchased on or after that date, including single-family, multi-unit home and commercial property policies. New rates will become effective for all existing policies on April 1, 2022, but there will be an option for existing policyholders to opt into the new method after Oct. 1, 2021, to take advantage of any expected rate decreases.

NAHB has requested sector-specific training materials regarding the additional building practices that can qualify for rate credits under the new methodology and will continue to work with FEMA throughout the rollout of the Risk Rating 2.0 program and push for the development of industry-specific briefings and resources in the coming months.

For more information, see NAHB’s fact sheet or visit FEMA’s Risk Rating 2.0 site.

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