The Federal Emergency Management Agency (FEMA) has announced changes to the National Flood Insurance Program (NFIP), a move that could increase costs for some homeowners, reports Bloomberg.
Under the new initiative, called Risk Rating 2.0, NFIP premiums will be tied to the actual flood risk of individual homes, instead of the current system which sets prices based on whether a home sits within the 100-year flood plain.
According to a Bloomberg article, Shana Udvardy, a climate resilience analyst for the Union of Concerned Scientists, said that the reform is “badly needed,” and described FEMA’s move as a “huge step in the right direction”.
In recent years, flooding events in the U.S. have been frequent and severe, and include the likes of Hurricane Irma, Hurricane Harvey, Hurricane Florence, and the Baton Rouge floods, among others. Following such events a large number of damaged homes lacked flood insurance, with reports claiming that FEMA’s current system failed to accurately and effectively measure the risk.
FEMA’s deputy associate administrator for insurance and mitigation explained that the new rating plan will help clients better understand their risk, which he feels will increase demand for protection.
FEMA is reportedly to use private-sector data to calculate the real flood threat for each home, and under the changes, homes with a lower risk are likely to see their premiums fall, while those at a higher risk could see their premiums more than double.
Ultimately, areas that have a higher risk of flooding are likely to experience higher rates, which some have warned could impact property values in those areas.
It’s also been announced that the new initiative will include new sources of flooding that were previously not included in the rating structure, such as intense rainfall.
Changes to the pricing of flood risk under the NFIP, which is the main provider of flood insurance in the U.S., have been attempted previously, but failed under political pressure. However, the fact that flood events have been so intense recently is thought to be one of the reasons FEMA has decided to overhaul its pricing structure at this time.