In a coastal town just a few feet above sea level, flood insurance is pretty much a must.

And while the cost of protection is undoubtedly a mere fraction of the out-of-pocket expense of replacing a water-logged property after a significant weather event, a recent overhaul of federal insurance calculations could put a strain on the wallets of local owners who haven’t seen their rates change significantly in quite some time.

“We’re trying to boil it down into simple coverage,” Ocean City Planning Director Bill Neville said of the Federal Emergency Management Agency’s new Risk Rating 2.0 plan. “The quick answer is … that in general half the flood insurance policies are going to go up a little bit and the other half are going to go down a little bit.”

Which half is which, though, is still unknown.

Risk Rating 2.0 is the first upgrade to FEMA’s National Flood Insurance Program since the 1970s. According to a FEMA news release issued in April, the new methodology allows the federal agency “to equitably distribute premiums across all policyholders based on the value of their home and the unique flood risk of their property.”

Under the current method, the release said many policyholders with lower-value homes are paying more than they should and policyholders with higher-value homes are paying less.

Risk Rating 2.0 squashes those disparities.

“To provide more equity, FEMA now has the capability and tools to address rating disparities by incorporating more flood risk variables,” the release said. “These include flood frequency, multiple flood types — river overflow, storm surge, coastal erosion and heavy rainfall — distance to a water source and property characteristics such as elevation and the cost to rebuild.”

And while the changes could prove beneficial for some property owners, others may see much larger increases than they are used to. According to an article in Insurance Journal, the potential for more costly rates, on the heels of a pandemic-fueled economic strain, recently prompted federal lawmakers in coastal states such as New Jersey and Louisiana to push for President Joe Biden to tell FEMA officials to delay implementing Risk Rating 2.0.

Locally, Neville said it is too early to tell how much the rates will change for existing policy holders, but added that no one should see a high premium increase immediately.

“At the moment, we don’t know what the effect is going to be except FEMA’s plan is that it be slowly integrated so it doesn’t all hit in the first year,” he said. “If it’s going to go up, it’s got a slow path to being raised for anybody that’s going up.”

Under the Risk Rating 2.0 plan, all new policies will begin operating under the new rates Oct. 1. Also beginning Oct. 1, existing policyholders eligible for renewal could take advantage of immediate decreases in their premiums. All other policies will be subject to the new rates April 1, 2022.

Officials with Willards-based Deeley Insurance Group, which handles flood insurance policies across Worcester County, explained in a blog post on the company’s website that Risk Rating 2.0 uses “the latest actuarial practices to set fairer, risk-based rates that better reflect a property’s true flood risk.”

It also said that “all NFIP policies — including single-family homes, multi-unit, and commercial properties — will change over to the new rating system.”

According to the FEMA release, the National Flood Insurance Program provides about $1.3 trillion in coverage for more than five million policyholders in 22,500 communities across the country.

Currently, according to data from FEMA, policy holders see average premium increases of $8 a month. Through Risk Rating 2.0, 23 percent of policy holders are expected to see immediate decreases of $86 a month. Another 66 percent are slated to experience average increases of 0 to $10 a month, 7 percent should see $10 to $20 jumps, and the remaining 4 percent are set for $20 monthly increases.

This story appears in the print version of the Ocean City Today on Oct. 8.

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