NFIP Revamp of Flood Risk Ratings Echoes Private Sector Approach
The National Flood Insurance Program is adopting an approach to rating flood risk employed by the private market for years that can more accurately capture an individual property’s true risk of flood, but there is uncertainty over exactly how the new rating system will work, while some critical problems such as how to deal with repeatedly flooded properties remain unaddressed by the new system.
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“I would like to see stricter rules as to where developers can develop,” said Alan Rubin, a New York-based principal and member of Blank Rome LLP’s severe weather emergency recovery team, citing areas such as Houston and near the Everglades in Florida. “That’s going to be very hard to do, because then you’re telling people where they can and cannot build, but I think that’s necessary.”
The Risk Rating 2.0 announcement came in the wake of a series of legislative proposals being released and debated to reauthorize the program ahead of another expiration, including a bill that would extend the NFIP to Sept. 30, 2024, and increase the limits of coverage from $250,000 to $500,000 for residential properties and from $500,000 to $1.5 million for nonresidential properties.
“Are those arbitrary numbers?” Mr. Rubin said. “Did they take a look to figure out that’s appropriate? Have they engaged the insurance industry and brokers to make sure those numbers are realistic? We know that it has to increase. We know that there needs to be change, but I just want to make sure that … it makes sense and that they bring in experts in the field to be able to say those numbers are viable.”
"NFIP Revamp of Flood Risk Ratings Echoes Private Sector Approach," by Gloria Gonzalez was published in Business Insurance on March 26, 2019.