New reports show underinsured areas & “paradoxical” development
A new report from the Consumer Financial Protection Bureau finds many properties may be underinsured in non-coastal flood zones, FEMA’s maps may be lulling homeowners into a false sense of security, and Fort Myers flood insurance rates drop even further after following FEMA’s Community Rating System guidelines. It’s all in this week’s Flood Digest.
Underinsured Off the Coast: Generally, our conception of high-risk flood zones has centered around coastal properties, with this being reflected in the much higher rates of flood insurance coverage for coastal homeowners. Inversely, inland properties at risk of flooding from inundated creeks and rivers are far more likely to be uninsured according to a new report from the Consumer Financial Protection Bureau (CFPB). The CFPB’s analysis looked at flood risk in the mortgage market across the Southeast and Central Southwest regions of the U.S. pulling data from FEMA and First Street Foundation, finding that around 440,000 properties (around 6% of the sample size) could be underinsured.
These “significant gaps” in flood insurance coverage for non-coastal flood zones highlight the disparity between FEMA’s National Risk Index (NRI) and First Street’s Flood Factor model – the latter suggesting that FEMA’s flood insurance maps are inaccurate leading to many at-risk properties – especially inland – not being correctly identified. One such example is Appalachia where the CFPB reported “significantly higher flood risk,” without designation from FEMA as a special flood hazard area, which means no required coverage through the National Flood Insurance Program (NFIP) or private carriers. Western Maryland, South Florida and Louisiana also seemed to be underrepresented in flood risk through FEMA’s NRI, where the CFPB found a compounding issue – many homeowners had lower incomes with less expensive houses and coverage meaning “the fewest financial resources to recover from flooding and (a higher) risk of suffering catastrophic loss after a flood.”
FEMA’s ‘Safe Development Paradox’: A new study from researchers at North Carolina State University is also at odds with FEMA’s flood maps, proposing the lines drawn for federal flood insurance (NFIP) risk are causing what has been named the “safe development paradox.” This report backs up what I’ve always said – flood waters don’t obey a FEMA flood map. Those maps deem areas ‘safe’ or ‘at risk’ when the issue is far more nuanced. The problem with strict delineation arises when ‘safe’ areas are only several hundred meters from the high-risk zone. The NC State study found upwards of 24% of all development in 2,300 counties nationwide falls within 250 meters of the 100-year (high risk) flood zone. Properties that fall in this zone may be just as vulnerable to flooding, especially given the increased frequency of storms and rainfall we’ve seen across the country. The devastation in North Carolina from Hurricane Helene is a prime example of this ongoing issue, where 104 lives were lost, and thousands of buildings were flooded – many outside the high-risk hazard zone and caught without flood coverage. While this analysis doesn’t cover the effect of FEMA’s Risk Rating 2.0, which began in 2021, it shows that FEMA’s maps may be outdated – and that far more Americans should be considering flood insurance for their homes.
Fort Myers’ Flood Rating Surges: Fort Myers’ adherence to FEMA’s Community Rating System that focuses on mitigation measures means it will see a jump from Class 9 to Class 6 and its residents with NFIP policies will see their premium costs fall by another 15% later in 2025. That’s in stark contrast to neighboring Fort Myers Beach which was put on probation late last year in violation of FEMA’s 50% Rule. The town is the only Lee County locality to fail to retain the federal rating and discount after harsh downgrade warnings were issued by FEMA in spring 2024. The Agency says the upgrade follows “months of diligent work by (Fort Myers) to provide the required documentation” to officials, which includes significant advancements in flood mitigation and resilience.
LMA Newsletter of 1-27-25
