How the Old System Worked vs Risk Rating 2.0
The Old System (1970s-2021)
Under the legacy methodology, FEMA looked primarily at one thing: what flood zone is your property in? If you were in Zone AE, you paid Zone AE rates. If you were in Zone X, you paid Zone X rates. Two homes on the same street, in the same zone, with very different actual flood risk, paid essentially the same premium.
The old system also did not account for the cost to rebuild your home. A homeowner with a $150,000 property and a homeowner with a $600,000 property in the same zone could pay similar premiums, even though the financial risk to the program was four times greater for the higher-value home.
Risk Rating 2.0 (October 2021-Present)
Risk Rating 2.0 prices every property individually. It uses catastrophe models, private sector data, and modern actuarial science to determine what your specific property’s flood risk actually costs the program. Two homes on the same street can now pay very different
premiums because they have different elevations, different distances to water, different foundations, and different replacement costs.
Flood zones still determine whether your lender requires flood insurance, but they no longer directly determine your premium.
The 18% Annual Cap: What It Means for You
FEMA caps NFIP premium increases at 18 percent per year. This sounds like a limit, but it is actually a guarantee of ongoing increases. If your property’s full risk-based rate under Risk Rating 2.0 is higher than what you currently pay, your premium will increase by 18 percent every single year until it reaches the full rate.
The Government Accountability Office estimates that most NFIP policies will not reach their full risk-based rate until approximately 2037. That means for many homeowners, annual increases will continue for another decade or more.
If your annual renewal notice shows a “full risk premium” that is significantly higher than your current premium, budget for continued 18 percent increases every year until those two numbers converge.
How Risk Rating 2.0 Affects Your State
FEMA publishes state profiles showing how Risk Rating 2.0 changes affected each state. From our data across 40 states:
In Texas, more than 45,000 homeowners dropped their NFIP policies after Risk Rating 2.0 was implemented — the largest drop in the country. Many of those homeowners switched to private carriers that offer lower rates.
In Georgia, 96 percent of our closed deals are through private carriers rather than the NFIP, largely because private carriers consistently beat Risk Rating 2.0 pricing.
In Connecticut and other Northeast states, older pre-FIRM homes with high replacement costs are seeing some of the steepest increases because the old system significantly underpriced their risk.
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Can You Appeal Your Risk Rating 2.0 Premium?
No. FEMA has not established an appeal procedure for Risk Rating 2.0 premiums. You can appeal your flood map designation (through a LOMA), but you cannot appeal the premium itself. This is one of the key reasons private flood insurance has grown — homeowners who disagree with their NFIP pricing can shop the private market for a lower rate.
Risk Rating 2.0 and Private Flood Insurance
Risk Rating 2.0 has accelerated the growth of private flood insurance. As NFIP premiums increase by 18 percent per year toward full risk-based rates, more homeowners are finding that private carriers offer better pricing.
From our data of over 12,000 policies placed nationwide, private carriers consistently offer lower premiums than the NFIP for most property types. The gap is widest for properties with favorable elevation and good risk characteristics.
Your lender is required to accept private flood insurance under the Biggert-Waters Act, as long as the policy meets or exceeds NFIP requirements.
