Today, FEMA issued notification of Risk Rating 2.0 program changes to the National Flood Insurance Program effective on October 1, 2021, the overall timeline for implementation of Risk Rating 2.0 and FEMA's expectations of NFIP insurers.
Earlier today, FEMA made an official announcement on Risk Rating 2.0 via bulletin w-21003. This memorandum provides notification of Risk Rating 2.0 program changes to the National Flood Insurance Program (NFIP) effective on Oct. 1, 2021, the overall timeline for implementation of Risk Rating 2.0, and FEMA's expectations of NFIP insurers.
The specific timeline for Risk Rating 2.0 can be seen here:
- April-September 2021: FEMA collaborates with and continues to periodically share draft guidance documents with NFIP insurers regarding Risk Rating 2.0 program changes.
- Aug. 1, 2021: NFIP insurers may begin quoting for policies with effective dates on or after Oct. 1, 2021.
- Sept. 1, 2021: FEMA releases final guidance documents for NFIP insurers detailing upcoming Risk Rating 2.0 program changes.
- Oct. 1, 2021: All new business policies effective on or after this date must be issued under Risk Rating 2.0. Existing policies renewing with effective dates between Oct. 1, 2021 and March 31, 2022 can renew under the legacy rating plan or renew their policy under Risk Rating 2.0.
- April 1, 2022: All existing policies with renewal dates on or after April 1, 2022 will be renewed under Risk Rating 2.0.
FEMA also released state-specific fact sheets that provide an overview of what Risk Rating 2.0 will mean for the NFIP rates within a state.
Among other things, the fact sheets break down what percentage of NFIP policies will see an immediate decrease in price, a $0-$120 increase in price per year, $120-$240 increase in price per year and a more than $240 price per year increase.
In the state-by-state documents, FEMA also notes that “under the current methodology, all NFIP policyholders have been subject to premium increases every year. Risk Rating 2.0, from a premium increase perspective, does not deviate significantly from the current methodology except annual increases will eventually stop under Risk Rating 2.0 once the full-risk rate is realized. Premium increases will also be subject to the 18% per year cap set by Congress for most policies."
Some lawmakers who represent coastal states, including most notably U.S. Senate Majority Leader Chuck Schumer (D-New York), have raised concerns with Risk Rating 2.0 over the last year. Many of those concerns were focused on potential rate increases and the lack of available data and have been amplified with public statements and letters to FEMA in recent days.
The Big “I" believes that Risk Rating 2.0, if properly implemented, has the potential to improve the NFIP experience for agents and consumers, but the rollout of the program will be critical in determining the success of the effort. As FEMA continues to provide more information regarding Risk Rating 2.0, we will continue to provide members with updates in the weekly News & Views e-newsletter.
Wyatt Stewart is Big “I" assistant vice president of federal government affairs.