FEMA Risk Rating 2.0: What S.C. needs to know
Residents of Sea Cliff could see increased insurance premiums on existing flood insurance policies that renew after April 1, due to the National Flood Insurance Program’s new system for setting prices.
The new rating methodology, called Risk Rating 2.0: Equity in Action, ensures “flood insurance rates are actuarily sound, equitable, easier to understand and better reflect an individual property’s flood risk,” according to a release from the Federal Emergency Management Agency. For new policies, this rating system has already been used since Oct. 1 of last year.
Risk Rating 2.0 compares rate changes to the old, legacy rating system that has been in place since the 1970s. “The comparison data debunks a huge myth held by many critics of the new methodology that under the old system, flood insurance rates were not subject to regular annual increases,” David Maurstad, the senior executive of the National Flood Insurance Program said in FEMA’s release. “The truth is rates have gone up every year for all policyholders and will continue to do so if no action is taken.
“The side-by-side comparisons show some policyholders now will experience decreases under year one of Risk Rating 2.0 while a majority of remaining policyholders will see premium increases mostly on par with what they already pay,” Maurstad added of the change.
FEMA said part of the changes now considers the cost to rebuild, an aspect that ensures “equitable” rates for all policyholders.
Glen Head resident Steven Warshaw, a real estate broker, believes that these changes, while unfortunate, are inevitable.
“I do think these changes are necessary,” Warshaw explained. “If you look at what’s happening everywhere, with climate change especially, it’s all happening close to the water.”
According to Redfin, a full-service real estate brokerage that details market trends, approximately 143 homes in Sea Cliff are at risk for flooding. Within 30 years an estimated further eight homes will be at risk. This will put 8 percent of the village in danger of flooding, with homes along the Boulevard and Shore Road most likely to be affected.
High Risk areas for flooding, as defined by FEMA, are areas with a 1 percent annual chance of flooding and 26 percent chance of flooding over a 30-year mortgage. In Sea Cliff — a community that saw widespread damage during Superstorm Sandy in 2012 — the base floodplain where flood elevations are provided are also considered when determining risk.
On FEMA’s website, a Flood Insurance Rate Map, can help determine risk by location. At Mike Walsh’s State Farm Insurance office in Bellmore, Chris Bauer, the agency’s flood specialist, showed the Herald how FEMA’s mapping system works. Entering an exact address into the mapping service, FEMA takes things such as location from the shoreline and elevation into account, thus determining the risk for flooding. Maps are drawn based on where there were losses and damage due to floods.
Insurance companies like State Farm cannot write National Flood Insurance policies — they must be written through FEMA. With that said, an agency’s licensing can allow for employees within that agency to write a flood policy through FEMA, using the mapping system as a tool to determine risk.
Flood insurance policies through FEMA require the first year’s premium be paid in full. After that, Bauer added, customers can opt to have flood and home insurance monthly premiums built into a mortgage payment. For example, if home insurance costs $120 a month, flood insurance costs $200 a month, and a mortgage is $3,000 a month, those three amounts would be lumped together into one monthly payment.
According to FEMA, there are some things that will not change with Risk Rating 2.0, such as limiting annual premium increases which requires that most existing rates cannot increase more than 18 percent in one year. Additionally, Flood Insurance Rate Maps will still be used.
Risk Rating 2.0 State Profiles can be found on FEMA’s website, fema.gov, along with additional information that further details the new system. Downloadable Excel sheets are provided, and breakdown a state by zip code, so homeowners can see what to expect. Premium increases from $10 to $120 or more a month can be expected, however, some policies in Sea Cliff will see significant premium decreases.
According to FEMA, potential and existing National Flood Insurance policyholders should contact their insurance company or agency to learn about their specific rates, and if the changes will affect their policy.
Will Sheeline contributed to this story.
