The overview
In October 2021, FEMA released Risk Rating 2.0, a new rating system for the National Flood Insurance Program that provides federally backed home insurance for floods. The new risk rating was designed to more equitably insure homeowners for floods based on the home’s risk of flooding, Fabian Gutierrez, FEMA Region 6 public affairs specialist, said in an email.
Under Risk Rating 2.0, flood insurance rates account for:
- Flood frequency
- Flood types such as river overflow, storm surge, coastal erosion and heavy rainfall
- Distance to a water source
- Property characteristics including elevation and cost to rebuild
“With the implementation of NFIP’s pricing approach, FEMA is now able to equitably distribute premiums across all policyholders based on home value and a property’s flood risk and set rates that are adequate, fairer and more equitable,” Gutierrez said.
The breakdown
With the start of Risk Rating 2.0, 23% of single-family home policyholders received an instant premium decrease, and premiums decreased $577 million in the first year—an average of $627 per policy, Gutierrez said.
Of FEMA’s nearly 3.15 million flood insurance policyholders in the U.S. and its territories, Texas has a total of 586,680 policies with 60.82%—or 356,845—of the state’s policies in Brazoria, Fort Bend, Harris and Montgomery counties alone, according to policyholder data from FEMA.
All homes and businesses with federal loans or mortgages in high-risk flood areas are required to carry flood insurance, although it is recommended for anyone, according to Texas Flood Insurance, an NFIP-established organization that sells flood insurance.
The other side
Although, not everyone agrees the Risk Rating 2.0 policy is a benefit. The policy fails to take into account homes in levee districts, said Rashid Khokhar, board president of the Fort Bend County Levee Improvement District No. 2.
Levee improvement districts, which are common along the Brazos River in Fort Bend County, are political subdivisions created in flood-prone areas. LIDs tax residents within the boundaries to maintain drainage systems and levees, or an embankment to prevent overflow, Khokhar said.
“[At LID 2] we decided we were going to do something so that a [Hurricane] Harvey-type event will not cause any problems for any of our residents,” he said. “Since then, we have spent $89 million on certain improvements.”
Although more precautions have been taken by the LID, residents within the area are still exposed to high premiums due to the flood-prone area, Khokhar said.
In fact, Fort Bend County LIDs joined together to form a flood management committee with the purpose of forming a collective approach to address federal, state and local regulations regarding levee areas, Khokhar said.
Why it matters
Floods are the most common natural disaster in the U.S., and they cause costly damages that aren’t covered by most home insurance policies, Gutierrez said.
“Flooding can happen anywhere at any time. Poor drainage systems, summer storms, melting snow, neighborhood construction and broken water mains can all result in flooding,” Gutierrez said.
The Greater Houston area has already seen multiple weather events in the first half of 2024, including flooding and a derecho windstorm in May as well as Category 1 Hurricane Beryl in July, which caused widespread power outages for 2.2 million residents, Community Impact reported.
Additionally, forecasters predict the Atlantic region will experience an active hurricane season through November.
What else?
Although floods sometimes result in federal disaster assistance, it is important for residents to understand floods often don’t result in a declaration, Gutierrez said. Additionally, disaster assistance often comes in the form of loans that must be repaid.
“Disaster assistance from FEMA and the U.S. Small Business Administration is designed to kick-start recovery, but is not enough to restore your home to its pre-disaster condition or to replace your treasured household items,” Gutierrez said. “Flood insurance does not have to be paid back, and it is designed to restore your property to its pre-disaster condition.”
To determine your flood risk, click here.
