Gloria Gonzalez March 18, 2019 Source:

Business Insurance

The National Flood Insurance Program is launching a new risk rating system for its flood insurance policies. David Maurstad, deputy associate administrator of the Federal Insurance and Mitigation Administration and chief executive of the NFIP, called Risk Rating 2.0 a “game-changing initiative for the NFIP” during a media call on Monday. More information about policyholder impacts and the implementation timeline will be released in the coming weeks, but the new rating system for flood risks will be “data-driven” and factor in different variables rather than basing flood insurance premiums simply on whether or not a policyholder is in a flood zone, Mr. Maurstad said. For example, the new system will determine a policyholder’s flood risk by incorporating elements such different types of flooding — heavy rainfall from a hurricane, river overflow or coastal surge — and a building’s distance to a coast or river. “We’re going to change an insurance rating structure that hasn’t fundamentally been changed since the 1970s,” he said. “We’re going to consider more flood risks than we currently do now. It is going to be based on replacement costs of the properties.” The intention is to try to “close the insurance gap,” Mr. Maurstad said.