Q: Which flood insurance policies are affected by Risk Rating 2.0?
A: All new National Flood Insurance Program (NFIP) flood insurance policies beginning October 1, 2021, are under the new Risk Rating 2.0 methodology for calculating premiums. All existing NFIP policies that are eligible for renewal beginning on October 1, 2021, and before April 1, 2022, are eligible to be renewed under their previous legacy rating plan or renew under Risk Rating 2.0 methodology, whichever results in the cheaper premium. Beginning on April 1, 2022, premiums for all NFIP flood insurance policies being established or renewed will be under Risk Rating 2.0.
Q: How will this affect the cost of my National Flood Insurance Program (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. Existing policies facing a full-risk (actuarial) rate that is higher than their previous rate are 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. Insurers can quote Risk Rating 2.0 premiums on policies with effective dates on or after October 1, 2021.
Q: How are the new Risk Rating 2.0 premiums calculated?
A: The new pricing methodology will incorporate additional data sources, a broader range of flood frequencies, the cost to rebuild, and multiple rating variables. Standardized rating tables will no longer be used. Rates will be 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) will no longer be used in the rating. However, ground elevations and first floor heights will be accounted for in the Risk Rating 2.0 rate calculation. The Risk Rating 2.0 factors include:
-
Additional Data Resources: FEMA uses new risk considerations to better quantify the real risk to a structure. To accomplish this, FEMA has integrated additional datasets into the rating structure. This will be included in the new rating and will be automated.
-
Broader Range of Flood Frequencies: Multiple events will be 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 will be a new rating element for all properties. The replacement cost will be 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 will not be used for Residential Condominium Building Association Policies (RCBAPs), but the Replacement Cost Value (RCV) for those structures will be 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 do not want to change my National Flood Insurance Program (NFIP) flood insurance policy? Can my policy be grandfathered?
A: All existing NFIP policies that are eligible for renewal beginning October 1, 2021 may renew their existing policies under the previous methodology. However, all existing policies renewed on or after April 1, 2022, will be subject to the new Risk Rating 2.0 methodology. At that time, no existing policies can be grandfathered under the previous rating methodology. Please contact your insurance provider for more information.
Q: What if I have an existing grandfathered National Flood Insurance Program (NFIP) policy?
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. Existing grandfathered policies will transition to their full risk rate with annual increases of 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), then you are not federally mandated to obtain flood insurance. However, a lender may on its own require flood insurance. Also, 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 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) will continue to be required to have flood insurance for the life of the loan.
Any structure with a Small Business Administration loan, regardless of location, will still be 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. The policy, if with NFIP, 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 new National Flood Insurance Program (NFIP) flood insurance policies beginning October 1, 2021, will be required to fall under the new Risk Rating 2.0 methodology. All existing policies that are eligible for renewal beginning October 1, 2021, and before April 1, 2022, will be eligible to renew under their previous rating methodology or under the Risk Rating 2.0 methodology, whichever is cheaper. Beginning April 1, 2022, all new and renewed NFIP flood insurance policies will be under the Risk Rating 2.0 methodology. At that time, all NFIP policies will be required to participate in the new Risk Rating 2.0.
Policyholders may look and see if there are private-sector flood insurance policies available as an alternative to NFIP policies. Please note, unlike the NFIP, private carriers are not obligated to issue policies to every applicant, and the 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 lapse in their NFIP policy coverage and will no longer qualify for discounted rates. There is currently no distinction between NFIP and private-sector policies regarding disaster assistance eligibility.
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.