Senators Call for NFIP Risk Rating 2.0 Reassessment Amid Premium Hikes
Industry Leaders Urge Reassessment of NFIP Risk Rating 2.0 Amid Rising Premium Concerns
Prominent U.S. Senators are urging FEMA to reevaluate the National Flood Insurance Program's (NFIP) current pricing structure, known as Risk Rating 2.0, due to significant premium increases affecting policyholder retention and program sustainability.
Calls for Reevaluation of Risk Rating 2.0
In response to substantial premium increases associated with the implementation of Risk Rating 2.0 in the National Flood Insurance Program (NFIP), several U.S. Senators, including Roger Wicker (R-Miss.) and Cindy Hyde-Smith (R-Miss.), have emphasized the need for the Federal Emergency Management Agency (FEMA) to reconsider the current pricing system. The Senators, led by Bill Cassidy (R-La.), have formally requested that FEMA Acting Administrator Karen Evans halt further roll-out of the Risk Rating 2.0 framework, citing concerns about the long-term viability of the NFIP.
Impact of AI-Driven Risk Assessment on Premiums
Risk Rating 2.0, introduced as a means to more accurately price flood insurance policies based on individual risk factors, has resulted in premium hikes nationwide. Data suggests approximately 77% of policyholders are now facing higher costs compared to the previous system. In states with significant flood risk, such as Louisiana, some homeowners have experienced premium increases exceeding 100%, leading to a notable decrease in NFIP participation.
Need for Broad Participation in Flood Insurance
"In order for flood insurance to be effective, participation must remain broad," noted participating Senators. Departures from the program concentrate risk among fewer policyholders, driving further premium increases and introducing greater volatility into the insurance pool. Concurrently, the decline in insured households may elevate reliance on post-disaster federal assistance, potentially escalating costs for taxpayers and deviating from pre-disaster insurance objectives.
Regulatory Compliance and Transparency Challenges
In their communication, Senators referenced previous requests for FEMA's transparency in sharing the foundational data for Risk Rating 2.0, alongside challenges in response adequacy to legislative concerns. Specifically, estimates suggest that a significant proportion, at least 84%, of Mississippi NFIP policyholders have encountered substantial premium increases under the new rating system.
Urgent Actions Required for Program Stability
As actions towards amending this trajectory are urged, Wicker and Hyde-Smith, along with co-signers such as John Kennedy, Jim Justice (R-W.Va.), Shelley Moore Capito (R-W.Va.), Tommy Tuberville (R-Ala.), and John Cornyn (R-Texas), stress the immediacy of reassessing Risk Rating 2.0 to mitigate further erosion of program participation and reinforce the insurance pool’s stability.
The appeal to Acting Administrator Evans reflects a concerted effort to address the structural challenges posed by the current system and safeguard the NFIP's foundational goals.