Q: Which flood insurance policies are affected by Risk Rating 2.0?
A: Since April 2022, premiums for all National Flood Insurance Program (NFIP) flood insurance policies are calculated under the Risk Rating 2.0 regime.
Q: How does Risk Rating 2.0 affect the cost of my NFIP flood insurance?
A: The goal of Risk Rating 2.0 is for premiums on all NFIP flood insurance policies to be based on the actual flood risks to structures and their unique characteristics. If you got your NFIP policy for your building prior to April 2022, and your full-risk (actuarial) rate under Risk Rating 2.0 is higher than the previous rate, your policy is on a transitional glidepath of annual increases of no more than 18% until the full-risk rate is reached. This could take several years depending on the amount of the full-risk rate policy. Please contact your insurance provider for more details.
Q: How are the Risk Rating 2.0 premiums calculated?
A: The Risk Rating 2.0 pricing methodology incorporates several data sources, a broad range of flood frequencies, the cost to rebuild, and multiple rating variables. Standardized rating tables are no longer used. Rates are calculated using an algorithm (a set of rules and processes for a computer to calculate the rate).
The flood zones and Base Flood Elevations used on FEMA's Flood Insurance Rate Maps (FIRMs) are no longer used in the rating.
However, ground elevations and first floor heights are accounted for in the Risk Rating 2.0 rate calculation. The Risk Rating 2.0 factors include:
- Several Data Resources: FEMA uses risk considerations from several data resources to better quantify the real risk to a structure. To accomplish this, FEMA has integrated several datasets into the rating structure. This is included in the new rating and is automated.
- Broad Range of Flood Frequencies: Multiple events are taken into consideration which include storm surges, tsunamis, coastal erosion, and inland flood - pluvial (i.e., relating to rainfall) & riverine (i.e., relating to a river).
- Cost to Rebuild: The building replacement cost is a now a rating element for all properties. The replacement cost is determined using a tool that is part of the rating engine. The rating engine will determine the replaced cost based on the information provided by the application. The replacement cost tool is not be used for Residential Condominium Building Association Policies (RCBAPs), but the Replacement Cost Value (RCV) for those structures is captured during rating.
- Rating Variables: These rating variables include distance to flooding source, flood type, building occupancy, construction type, foundation type, ground elevation, first floor height, number of floors, and prior claims.
Q: What if I had an existing grandfathered National Flood Insurance Program (NFIP) policy prior to April 2022?
A: Grandfathering is being eliminated under Risk Rating 2.0, since the Base Flood Elevations and flood zones on FEMA's Flood Insurance Rate Maps (FIRMs) will no longer be used in calculating premiums. Grandfathered policies existing prior to April 2022 are transitioning to their full risk rate with annual increases of no more than 18%.
Q: Do I need flood insurance if I am not in a Special Flood Hazard Area?
A: If your structure is not in a Special Flood Hazard Area as mapped by FEMA's Flood Insurance Rate Maps (FIRMs), and you do not have a Small Business Administration (SBA) loan on the structure, then there is no federal mandate to obtain flood insurance. Any structure with an SBA loan, regardless of its location, is required to have flood insurance for the life of the loan. Additionally, a lender may on its own require flood insurance. In any case, it is a good idea to consider flood insurance as FEMA's maps do not show all sources of flooding, such as larger floods, mudflows, local drainage issues, or broken water mains. Damages due to these types of flooding are typically covered under NFIP flood insurance policies, and, with NFIP policies, the flooding event does not have to be declared a disaster for you to file a claim. In addition, all NFIP policies will receive a CRS discount on the full-risk (actuarial) rate. Please contact your insurance provider for more information.
Q: Do I need flood insurance if I am in a Special Flood Hazard Area?
A: Structures with federally-backed mortgages that are located in Special Flood Hazard Areas mapped by FEMA's Flood Insurance Rate Maps (FIRMs) are required to have flood insurance for the life of the loan.
Any structure with a Small Business Administration loan, regardless of location, is required to have flood insurance for the life of the loan.
Structures located in Special Flood Hazard Areas mapped by FEMA's FIRMs that have received FEMA flood assistance grants must have flood insurance maintained in perpetuity, regardless of change in ownership. If the policy on the structure is an NFIP policy, it can be transferred to the new owner(s).
Please visit our Flood Zone Determination website to see if your structure is in a Special Flood Hazard Area.
Q: How does FEMA define a Special Flood Hazard Area?
A: FEMA defines a Special Flood Hazard Area as the area that will be inundated by the flood event having a 1-percent chance of being equaled or exceeded in any given year. Please visit our FEMA Flood Zone Definitions webpage for more information.
Q: What if I do not want to participate in Risk Rating 2.0?
A: All National Flood Insurance Program (NFIP) flood insurance policies are under the Risk Rating 2.0 methodology.
Policyholders may look and see if there are private-sector flood insurance policies available as an alternative to NFIP policies. There is currently no distinction between NFIP and private-sector policies regarding federal disaster assistance eligibility. However, unlike the NFIP, private carriers are not obligated to issue policies to every applicant or renew policies, and the private policies may not have as much coverage as NFIP policies.
Additionally, policyholders who leave their NFIP policies and subsequently return to an NFIP policy after 30 days will trigger a lapse in their NFIP policy coverage. Structures that had historically received subsidized rates or statutory premium increase caps, lose those privileges and will no longer qualify for discounted rates. When returning after 30 days, the property is treated as a brand-new application, and the premium is immediately calculated at its full actuarial risk rate. This can cause the annual premium to skyrocket .
Q: How can I contact LA County for more information regarding Risk Rating 2.0?
A: Please note that Risk Rating 2.0 is a federal program administered by FEMA. We recommend that you contact your insurance provider for more information. If you would still like to contact us, you can email us at FloodAnalysis@pw.lacounty.gov.