FEMA wants rainfall to be part of risk assessment for flood coverage

NEW ORLEANS (WVUE) - FEMA plans to change how flood insurance rates are calculated and rainfall will be part of the equation.

GNO, Inc., which leads a national coalition that is pushing to make the flood insurance program better while keeping premiums affordable, said the program -- called Risk Rating 2.0 -- is designed to make use of more accurate data, according to Michael Hecht, president and CEO of the company.

“In general, we like the direction, but obviously the devil’s in the details,” Hecht said,

The changes are still months away.

“Next April they’re going to be releasing what’s called Risk Rating 2.0, and then that’s going to be put in place in the autumn of 2020,” Hecht said.

Several years ago, GNO Inc. founded the Coalition for Sustainable Flood Insurance, which covers dozens of states, including some in the North.

Hecht said over the next year they will work with FEMA to get a full understanding of the changes.

“Most significantly is that now, instead of assessing risk on a flood-zone-by-flood-zone basis, it’s going to be on a house-by-house basis, so a lot more granularity, a lot more detail,” he said.

Under the plan, more sophisticated tools will be used to assess a property’s actual risk.

“They’re going to be considering commercial catastrophe maps and some other factors," Hecht said. “Most significantly, rainfall is going to be considered part of the risk assessment, and that’s a big change from before when it was just about flood surge, just about sea-level rise.”

The new rates will also take into account the cost of replacing flood-damaged property.

“And now replacement cost is going to be considered as part of the assessment, in the same way it is for your typical homeowners’ insurance,” Hecht said.

The changes could result in people living in the same neighborhood paying far different amounts for flood coverage.

“There clearly are going to be winners and losers within this, within flood zones. And what we want to make sure is, that one, that absolutely affordability is protected and that if a person built the home they were supposed to, and have maintained their flood insurance and paid their taxes that they’re not going to get punished untowardly,” said Hecht.

He said grandfather clauses and overall premiums caps are in place.

“It’s going to allow you to, we hope, experience at a maximum 15 percent increases every year," Hecht said. “But we have to understand from FEMA how this is being calculated, how it’s going to be rolled out and how affordability is going to be preserved for homeowners, particularly for individuals in our region, who now have much better mitigation, much better flood surge mitigation, but for whom rainfall is still a concern.”

David Maurstad, Chief Executive of the NFIP said the following during a teleconference on Risk Rating 2.0:

“The National Flood Insurance Program is excited to announce Risk Rating 2.0, a new, advanced system that will improve rate flood risk. Our goal is to transform the National Flood Insurance Program (NFIP) to better reflect industry best practices and improve the policyholder’s experience. The new rating plan will help customers better understand their flood risks, provide them with more accurate rates based on their property’s unique risks and offer more equitable rates to owners of lower-value homes. Rates for all single-family homes will be available to industry partners through the new system on April 1, 2020, and the rates will go into effect nationwide for single-family homes Oct. 1, 2020.

While our current system accounts for a single flood hazard, our new system will determine a customer’s flood risk by incorporating multiple, logical rating variables -- like different types of flood, the distance a building is from the coast or another water source and the cost to rebuild a home or building.

We recognize there is both excitement and curiosity around the new rating plan and look forward to sharing more information in the coming weeks, including policyholder impacts and our implementation timeline.

By making the NFIP a program that people value and trust, is fair and easy to understand, we hope to reduce the insurance gap nationwide and increase mitigation efforts to reduce the financial impact of future disasters.”