Risk Rating 2.0 is a new flood insurance rating system develop by FEMA and the National Flood Insurance Program (NFIP). The NFIP was formed to help assist homeowners with purchasing federally backed flood insurance. The new pricing methodology incorporates industry best practices to deliver rates that are actuarily sound and easier to understand. The main focus is on determining an individual property's unique flood risk.

The new rating methodology incorporates many flooding variables that were not considered in the past. Since the 1970s, flood insurance policies through the NFIP have been mostly related to a property's structural elevation compared to the Base Flood Elevation or BFE within a zone on a Flood Insurance Rate Map or FIRM. To strengthen this analysis, FEMA is now leveraging private sector data sets, catastrophe models and evolving actuarial science. Some of the noted flood risk variables include:

• Flood Frequency
• Flood Type - river overflow, storm surge, coastal erosion
• Distance to Water Source
• Property Elevation
• Cost to Rebuild

While the overall rating methodology is changing (no longer relying on the various rating tables; Table 2A, Table 3 Building, Table 3 Contents, etc.), some aspects of the NFIP will remain the same, including:

• Limiting Annual Premium Increases (<= 18% per year)
• Using FIRM maps for Mandatory Flood Insurance Purchasing and Floodplain Management
• Continued Discounts for Pre-FIRM and Newly Mapped Properties
• Community Rating System (CRS) Discounts for Participating Communities

FEMA has released some additional technical documents including an overall report from the main consultant (Milliman, Inc.) which reviews the purpose, underlying data, methodology, and actuarial standards for Risk Rating 2.0. Accompanying this report are two Excel Workbooks that demonstrate new example calculations and rating factors.
Additional Documents from FEMA

• Risk Rating 2.0 Methodology and Data Sources
• Risk Rating 2.0 Methodology and Data Sources - Premium Calculation Worksheet Examples
• Risk Rating 2.0 Methodology and Data Sources - Appendix D Rating Factors

Additionally, FEMA has provided a national snapshot for how existing policies will change under Risk Rating 2.0. FEMA has broken down these changes into four distinct categories: Green, Blue, Dark Blue, and Grey. See the figure below:

Green

The Green bar represents policies that will see an immediate decrease in flood insurance costs when Risk Rating 2.0 becomes effective.

Blue

The Blue bar represents policies that will see an increase in flood insurance cost by $0 to $10 per month when Risk Rating 2.0 becomes effective.

Dark Blue

The Dark Blue bar represents policies that will see an increase in flood insurance cost by $10 to $20 per month when Risk Rating 2.0 becomes effective.

Grey

The Grey bar represents policies that will see an increase in flood insurance cost greater than $20 per month when Risk Rating 2.0 becomes effective.

Existing policy holders can begin contacting their insurance providers on August 1, 2021 to learn more information about how Risk Rating 2.0 will impact their policy. In more general terms, new policies beginning October 1, 2021 will be subject to the new rating system and any remaining policies renewed on or after April 1, 2022 will be subject to the new rating methodology.

FEMA recently released more detailed information for how policies will change throughout each state along with a county and zip code analysis. No Flood Florida has processed this data for the State of Florida and an example is shown below:

The figure provides a brief description regarding the efforts related to Risk Rating 2.0, along with a breakdown for how policies throughout Florida are changing (we see similar trends to the national averages). The figure also contains a visualization of the county, the example shows Alachua County along with the NHD Waterbody features to provide some insight for the different hydrologic features within the county.
On the right, a bar chart is used to compare the various categories FEMA defines for the insurance changes - Green, Blue, Dark Blue, and Grey. The specific county stats are displayed along with the total number of Single Family homes currently associated with NFIP flood insurance policies. Below the bar chart, the specific percentages of each group are defined along with the corresponding number of properties. For Alachua County, around 2,172 properties are supported by NFIP flood insurance policies and 75% will see increased insurance cost between $0 and $120 per year.
The following table provides links to each of the 67 counties within Florida. Simply click on your county of interest to see how your County will be impacted by the Risk Rating 2.0 changes.

We hope to continue to provide updates and more information regarding the Risk Rating 2.0 roll out from FEMA over the next few months. Reminder - policies will start to be impacted on October 1, 2021.

Taylor Lankford
CTO, No Flood Florida