How flood insurance premiums are calculated - The NFIP flood insurance premium for a structure will no longer be based on FEMA's base floods and flood zones shown on their Flood Insurance Rate Maps (FIRMs), the structure's foundation type, and the lowest-floor elevation in mapped Special Flood Hazard Areas. Under Risk Rating 2.0, additional data, a broader range of flood frequencies, the cost of rebuilding, and numerous other factors unique to the structure and the property on which it is located are taken into account. This methodology more accurately identifies the true flood risk to the structure. Policyholders of lower-value homes will no longer be paying more than their shared risk.
First-floor heights will replace the lowest-floor elevation in premium calculations - Under Risk Rating 2.0 the NFIP flood insurance premium will take into account the first-floor height of the structure instead of the lowest-floor elevation. Risk Rating 2.0 will also allow the policyholder three options on how to determine the first-floor height, with the lowest-cost option being applied:
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Automatically generated by the Risk Rating 2.0 calculation engine;
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Determined by FEMA staff - using informed assumptions, policy application information, and various datasets; or
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Determined by an Elevation Certificate - provided by the policyholder at their expense.
For condominium and apartment policies, a unit's policy will be based on the floor the unit is actually located.
How prior claims are considered - The prior claims history on a structure will not be included in the initial Risk Rating 2.0 premium calculation for the structure. The prior claims variable, based on a rolling 20-year period, will be applied at the time of the renewal of the policy, after the first loss under the new Risk Rating 2.0 pricing methodology.
For structures listed by FEMA as Severe Repetitive Loss (SRL) structures, the SRL surcharge will continue to be applied to the structure's premium, until the structure has its first loss under the new Risk Rating 2.0 methodology.
Policyholders should consult their insurance agents for more details on the handling of prior claims.
Expansion of Community Rating System (CRS) discounts - Residents in communities participating in the NFIP's CRS program are eligible for a CRS discount on their NFIP flood insurance premiums. This CRS discount used to be applicable to only full-risk rated policies, which usually were for structures in the FEMA-mapped Special Flood Hazard Areas. Under Risk Rating 2.0, the CRS discount is now applicable to every structure in a CRS community, regardless of the FEMA-mapped flood zone in which the structure is located. The amount of the CRS discount is based on the community's CRS classification.
Unincorporated Los Angeles County is a CRS Community. Los Angeles County’s current CRS Class 7 rating yields a 15% discount on NFIP flood insurance policies in unincorporated areas. As of April 1, 2022, Los Angeles County will have a CRS Class 6 rating, which will yield a total 20% discount on NFIP flood insurance policies in unincorporated areas. The CRS discount will only be applied to the actuarial rates. Many new policyholders with a full-risk rate will see these CRS discounts applied immediately. Existing policyholders will be on a transitional glidepath to their full-risk (actuarial) rates with an increase of no more than 18% annually. This could take several years depending on the amount of the full-risk rate policy. Once the actuarial rate is reached, the CRS discount will be applied to their premiums.
New flood insurance discounts - Under Risk Rating 2.0, structures are eligible for new discounts for:
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Their machinery and equipment (such as water heaters, furnaces, air conditioning units) being elevated above the first floor of their structure;
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Flood vents being installed in their enclosures beneath the first floor of their structure; and
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Dry floodproofing measures being implemented (in unincorporated Los Angeles County, only for non-residential structures).
Many new policyholders with a full-risk rate will see these discounts applied immediately. Existing policyholders will be on a transitional glidepath to their full-risk (actuarial) rates with an increase of no more than 18% annually. This could take several years depending on the amount of the full-risk rate policy. Once the actuarial rate is reached, these discounts will be applied to their premiums.