"There's no question with climate change and the changing conditions that if we do nothing, the program is not going to be sustainable.Flooding occurs when a river bursts its banks and overflows onto the surrounding land. He said FEMA has proposed a means-tested affordability program that will help low-to-moderate- income individuals pay for the flood insurance that they need. "There's just too much disaster, suffering, going on that we can minimize if we are able to have more people have the coverage they need."
Not enough people in the high-risk area have the coverage they need to be able to be on the path to recovery after a flood event," Maurstad said. "No question we need to close the insurance gap. Flood zones are updated only every five years, by congressional mandate.ĭuring its reauthorization process this fall, FEMA will also put forward more proposals to make the program more fiscally stable. More than 200,000 homes were damaged or destroyed, and three-quarters of them had no flood insurance, as many were outside FEMA flood zones. Hurricane Harvey in Houston was a stark example. As storm damage increases, FEMA is increasingly paying billions of dollars out to homeowners who are uninsured. The change in the NFIP calculation is not just to bring better equality to the program but also to help sustain it. "Depending on how much that insurance goes up is going to correlate perfectly to the value of that home for any new homebuyer who comes in and says, 'This home looks great, but now I have to pay $6,000, $10,000,' whatever it might be, a year in flood insurance, which is just going to take away from the value of the actual asset itself," he said. Those scores are currently posted on some of the nation's largest home listing sites, including and Redfin. "You can think of it as revenue coming in and expenses going out," said Matthew Eby, founder and executive director of First Street Foundation, which calculates flood risk scores for every home in America. The costs incurred by any home are factored into its value, whether those costs are insurance, taxes, maintenance on an older home, or the home's location. This shift will inevitably change the value of some homes. "It's just important that we address that inequity that the lower-value homes shouldn't be subsidizing the higher-value homes going forward," he said. The majority of homeowners, however, will see rates go up about 10%, which is the normal annual increase. Maurstad says rates will go up for some and down for others. Under the new model, the Florida owner would almost certainly pay more. Right now, the owner of a $1 million Florida home and the owner of a $200,000 Montana home are paying the same rates for insurance, even though their risk levels are decidedly different. Most important, FEMA will now factor in future catastrophic modeling from climate change, including sea level rise, drought and wildfires. Under the new model, FEMA will also look at the home's replacement cost whether the risk is rainfall, river or coastal flooding and how close the property is to the source of the potential flooding. Today, federal flood insurance is based on the property's elevation and whether it has a 1% annual chance of flooding.
And so that's what's driving the change."
And we have a responsibility to make sure that we have actuarily sound, fair, and equitable rates. "What we found out was that many folks with lower-value homes were paying more than they should, and those that had higher-value homes were paying less than they should. "No question that this is the most substantive change to the program going back to 1968," said David Maurstad, deputy associate administrator for federal insurance and mitigation and senior executive of the flood insurance program. Finally, climate change will be factored in. 1, the program will undergo a complete overhaul to make insurance pricing more accurately reflect each property's unique flood risk. Nearly one-third of NFIP policyholders are not mandated to carry it. Homeowners in FEMA-designated flood zones are required to purchase flood insurance, but others do so voluntarily. Under the current program, the Federal Emergency Management Agency provides $1.3 trillion in coverage for more than 5 million policy holders in 23,500 communities nationwide.
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