October 01, 2021 | Law360 | 1 minute read

Bracewell’s Vince Morgan recently discussed with Law360 the National Flood Insurance Program’s (NFIP) new risk ratings program, called Risk Rating 2.0, which overhauls a model of subsidized flood insurance that has not been changed in 50 years.

“The more precise rating is going to more accurately price the risks to the people who really have [risk] and the people who don’t,” said Morgan. “For most insureds, especially commercial policyholders, it’s a welcome change because they probably paid more than they needed to and want to have insurance priced as accurately as it can be.”

Since the NFIP began in 1968, properties were evaluated for flood risk based on their location either inside or outside a flood zone, with modifiers such as elevations, national averages for repair costs and mitigation measures affecting the premium price. Risk Rating 2.0 overhauls that model, with premiums determined via its in-house system that uses actuarial data that includes many more variables, bringing its risk rating system more in line with those used by private insurers.

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