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:
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:
GreenThe Green bar represents policies that will see an immediate decrease in flood insurance costs when Risk Rating 2.0 becomes effective.
BlueThe 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 BlueThe 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.
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:
|Clay||Gilchrist||Indian River||Manatee||Palm Beach||Sumter|
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.
CTO, No Flood Florida