Insurance for Flood Risk to Property

Nielsen & Treas LLC, located in Metairie, Louisiana, has more than 30 years of experience with governmental interest litigation. Among its areas of expertise, Nielsen & Treas LLC guides insurance clients through the complexities of the National Flood Insurance Program (NFIP).

In April 2021, the Federal Emergency Management Agency, or FEMA, made changes to the pricing methodology for the NFIP. The new system, Risk Rating 2.0: Equity in Action, involves the distribution of premiums to policyholders based on the value of their home and the flood risk. According to FEMA, the change is to meet the Agency’s goal, that of reducing the loss from a flood. FEMA has also incorporated other variables, such as flood frequency, variety of flood type, and proximity to the nearby water source.

Prior to these changes, the pricing methodology had not been changed over the past 50 years. FEMA had realized that a policyholder with a lower-valued home paid more than their share of the risk, while those with higher-valued homes paid less than expected. The new methodology corrects this problem by providing a more equitable and simpler flood risk policy, so that a policyholder pays a fair amount that truly corresponds to the property’s flood risk.