Pew Commends National Flood Insurance Program for Connecting Premiums and Flood Risk

WASHINGTON—The Pew Charitable Trusts applauds the implementation today of Risk Rating 2.0: Equity in Action, the Federal Emergency Management Agency’s new system that sets National Flood Insurance Program premiums using industry best practices, up-to-date flood data, and catastrophic modeling to better reflect each property’s unique flood risk. FEMA launched the system for new policies on Oct. 1, 2021, and today begins expanding its use to existing policies.

Laura Lightbody, director of Pew’s flood-prepared communities project, issued the following statement:

“For far too long, flood insurance premiums were based on an antiquated system that often led to many property owners not paying enough for flood insurance while others paid too much. Risk Rating 2.0 aims to fix that imbalance by giving policyholders fairer rates and a more accurate assessment of their flood risk. The information will also promote action to mitigate those risks. 

“This new system relies on up-to-date data to align premiums with a property’s real risks, including how close it is to water, its elevation, and the cost to rebuild. This leads to more equitable premiums: Property owners with higher risk and projected repair costs pay more and those with lower risk and repair costs pay less.   

“In fact, under Risk Rating 2.0, about 20% of current policyholders will see a decrease in their flood insurance rates over the coming year, while the majority will see a modest increase of $10 or less a month on average. By comparison, under the old system, all policyholders would have faced increases this year. 

“This is a clear signal by the federal government to homeowners and communities about the cost of living in flood-prone areas and an important first step toward encouraging less risky development and safer communities.”