Flood insurance premiums could rise and property values fall in the most deluge-prone areas under a plan the Trump administration intends to roll out in coming weeks to change the way risk is calculated under the National Flood Insurance Program.
Instead of simply focusing on whether a home is inside or outside of the 100-year flood plain, the Federal Emergency Management Agency plans to use private-sector data to calculate the real flood threat for each home and set costs based on that data, according to people familiar with the effort and a briefing document obtained by Bloomberg.
Samantha Medlock, North America head of capital, science and policy at insurance broker Willis Towers Watson Plc, said the change “could be the first major advancement to improve understanding of flood risk since the creation of the NFIP itself.’’
The change could also hurt communities with the greatest flood risk. The new policy “is certainly an issue of concern and one we are actively tracking and engaged on,’’ Liz Thompson, spokeswoman for the National Association of Home Builders, said in an email.
The overwhelming majority of American households with flood coverage receive their policies through the National Flood Insurance Program, which covered about 5 million policyholders in 2017. Despite the growing risk of flooding due to climate change, the number of policies under the program has fallen about 10 percent from its peak in 2009.
Flood insurance will get fresh attention this week from Congress. On Wednesday, the House Committee on Financial Services is set to hold a hearing on reauthorizing the NFIP.
Lawmakers have struggled to reform the program. In 2012, Congress passed changes that would impose premiums that reflected the full risk for homes, only to back down two years later in the face of intense public opposition.
FEMA, asked to comment on its plans, offered a statement by David Maurstad, deputy associate administrator for insurance and mitigation, who said the new system “will help customers better understand their flood risk and provide them with more accurate rates based on their unique risk.”
The initiative, which FEMA calls Risk Rating 2.0, comes as climate change places growing pressure on the publicly subsidized flood insurance program. Claims often outpace premiums, saddling the program with a debt that topped $30 billion in 2017. The models that determine those rates ignore certain kinds of flooding, such as intense rainfall. And many Americans at risk of flooding nonetheless don’t buy insurance.
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