The National Flood Insurance Program finally took a leap into the 21st century.
For the first time in more than five decades, the Federal Emergency Management Agency is making major changes to the program, which covers nearly 5 million homes. For most homeowners, that’s translating into reduced or stable premiums, according to Bloomberg News.
There will be increases of at least $10 a month on roughly 11 percent of homes in the program, primarily higher-value properties. Those premiums may increase until they hit a $12,000 annual cap.
Previously, newer properties had some of the lowest fees, while some of the oldest homes in the program were charged the most.
“There was an inequity in the program that built up over time that needed to be addressed,” David Maurstad, senior executive of the NFIP, told the publication.
FEMA has adopted catastrophe models used by the private insurance industry to help determine premiums — a significant change from its circa-1970s model, which rated properties based on whether they were in severe flood zones and what their elevation was.
The new program’s rollout will be gradual, and increased premiums won’t kick in until April 2022. In turn, FEMA’s revenue will drop by nearly $500 million during the program’s first year, down from the $4.5 billion it currently collects in premiums. It will eventually even out in a process that could take as long as 15 years.
Premiums in the NFIP have been rising for years, but the program is more than $20 billion debt because of sea level rise and increased storms.
[Bloomberg] — Danielle Balbi