Flood Insurance Changes 2021 Risk Rating
LAST UPDATED: 13 September 2021

FEMA is completely changing the way it rates flood insurance policies. The National Flood Insurance Program (NFIP) was created over 50 years ago. This is the first significant update to the way the NFIP calculates rates in the program’s history.

The original rating methodology relied on static Flood Insurance Rate Maps (FIRM) to rate policies. As a result of the rudimentary rating structure, cross-subsidies developed within the program. Most notably, inland properties were subsidizing coastal properties and lower value homes were subsidizing higher value homes.

Risk Rating 2.0 is designed to determine a specific risk-based premium for each individual structure, using probabilistic modeling as opposed to FIRMs and introduce additional rating variables such as distance to flooding source, risk of flood driven by rain, and overflow from creeks and rivers, and a structure’s replacement cost.

Owners of properties insured by an NFIP policy on October 1, 2021, are protected by statutory limits on premium increases. In most cases, those policies will increase by 18% annually until the Full Risk Premium is reached. A buyer of an insured home will pick up on the seller’s “glide path” when the home is sold. New policies written on homes not insured by the NFIP on October 1, 2021, will generally be more expensive...possibly much more expensive...though policies issued by private flood insurers may be an attractive alternative to the NFIP.

For additional information regarding Risk Rating 2.0, please visit: Risk Rating 2.0: Equity in Action | FEMA.gov

This document was created to provide a broad overview of the changes from Risk Rating 1.0 (RR 1.0) to Risk Rating 2.0 (RR 2.0). It is not to be used as specific guidance for any specific building or property. The only way to determine the cost of flood insurance for a given property under Risk Rating 2.0 is to have a licensed insurance agent prepare a quote.


Thank you to Chris Heidrick, Heidrick & Company for providing the content for this article.

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