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FEMA’s new risk rating factor increases flood insurance rates across the country

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Due to FEMA’s new risk rating factor, about 2.7 million (81%) owners of single-family homes across the country saw their premiums rise as of April 1 — 9% of policyholders are facing increases of $120/mo and 4% are seeing jumps of $240 or more. Here are four states that are the most heavily impacted by flood insurance rate increases:

  • In Florida, 800,000 (88%) policyholders are expected to see increases.
  • In Texas, 600,000 (89%) policyholders will see premiums rise.
  • In Mississippi, 43,000 (87%) policyholders will see premiums increase. 
  • In Louisiana, more than 335,000 (83%) policyholders will face higher premiums. 

In these four states, homeowners have traditionally paid less for flood insurance than the typical U.S. policyholder, with Texans paying the lowest rate ($504) in any state. 

In fact, 20% of properties in Florida face substantial flood risk, and Texas is home to some of the most flood-endangered cities in the nation. These two states historically have lower flood-insurance premiums because homes are typically built to a higher standard, but FEMA’s new methodology for assessing flood risk is setting standardized rates for coastal and inland areas and the increase in residents makes the rate increase seem pretty substantial. 

Texas and Florida, in particular, saw their populations significantly increase due to pandemic-driven migration with Texas welcoming more than 300,000 residents and Florida welcoming more than 200,000. While most of these movers had the desire to move to a more affordable city, flood risk was probably not something they were thinking about. 

With the deployment of the new risk rating factor, one of FEMA’s goals was to make rates more consistent with each policyholder’s flood risk and to alleviate those with lower-value homes that have been paying more than they should. Despite that, neighborhoods with their highest earners are seeing relatively small changes in their rates. 

Most of the flood insurance rate increases are capped at 18% per year by law, but FEMA predicts it will have to continue to implement rate hikes for the next 5-10 years potentially impacting where people decide to buy and build homes in the future. 

Get the state-by-state breakdown of policy increases affected by FEMA’s new methodology in Redfin’s latest report.

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