The Trump Administration intends to roll out a new way to calculate flood risk in the next comings weeks under the National Flood Insurance Program which could cause flood insurance premiums to rise and property values to fall. Instead of focusing on whether or not a property is inside or outside of the 100-year flood plain, FEMA plans to use private sector data to calculate the “real” flood threat for each home and set the costs of flood insurance based on that data.
The change can be a good and bad thing for homeowners. On one hand, it would be the first real major advancement to improve the understanding of flood risk giving homeowners a proper evaluation of the likelihood of a flood in their home. On the other hand, communities that weren’t in the flood zone or near the flood zone could be facing the need to have flood insurance by the government. An unexpected cost that many families might not be able to handle.
The National Flood Insurance Program (NFIP) currently covers 5 million people as of 2017. Even with the increase in flooding due to climate change, that’s 10% lower than properties covered in 2009. The House Committee on Financial Services will hold a hearing tomorrow on reauthorizing the NIFP. In 2012, the government tried to reform NIFP but failed to do so after a public outcry. The reason for the reform is that claims often outpaced premiums which caused the NIFP to have a debt of $30 billion in 2017. The current model that determines rates do not take into consideration flooding from intense rainfall. The new risk assessment system will take things like that under consideration when determining rates.
The goal is to have more transparent rates so people will get insurance coverage. The impact on what this will have on property values has yet to be seen but it will be interesting once the new premiums roll out.