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Rating Risks: The Expanding Cost of Coastal Living

Oct. 18, 2021
CLARK'S REMARKS: The National Flood Insurance Program's new methodology incorporates more variables than before, and FEMA's updated pricing now includes rivers, streams and creeks.

According to the National Oceanic and Atmospheric Administration's Office for Coastal Management, 40% of the U.S. population – more than 128 million people – now live in coastal counties that make up less than 10% of the total U.S. land mass, excluding Alaska.

From 1970 to 2010, the population in U.S. coastal counties increased by 34.8 million. This century, alone, at least through 2017, saw eight million Americans move to such areas. The reasons aren’t surprising. In fact, the sun and sea even motivated my wife and me to move to a South Florida beach community 14 years ago, But it’s been more expensive than we had anticipated and now it's about to get worse.

Granted, beach living has always been a bit pricey, with typically large mortgages and high property taxes. And, of course, windstorm (hurricane) insurance premiums are expensive and have been growing every year. But those policies exclude flood insurance, which has traditionally been made affordable only though large federal subsidies.

Now, the Federal Emergency Management Agency (FEMA) has recognized the climate-associated risks of living on the coast brought about by climate change and sea level rise. As a result, the agency has updated the National Flood Insurance Program's risk rating methodology through the implementation of a new pricing formula called Risk Rating 2.0. Due to the economic impacts of COVID-19, the new rates are being rolled out in phases. Phase I, which began Oct. 1, affects all new policies and existing policies eligible for renewal. Phase II will be for all remaining policies renewing on, or after, April 1, 2022.

According to FEMA, rates have been predominantly based on relatively static measurements for nearly half a century, with the primary determining factor being the property’s elevation within a zone. Risk Rating 2.0 incorporates more variables than did the old system, including the type (storm surge, coastal erosion, river overflow) and frequency of flood events, as well as the distance from a body of water and the property’s elevation.

The new model will also consider the cost to rebuild the home, resulting in significantly higher premiums for high-end coastal properties.  Although most homeowners will see only small increases in their annual premiums ($120 or so), those beautiful beach front homes could end up costing more than $14,000 per year in additional flood insurance premiums. Most of those homes are in Florida, Texas, New Jersey, and New York. However, land-locked states like Iowa, Missouri, and Nebraska could also see premium increases for those who live near rivers, streams, and creeks that are prone to overflow during heavy rains.

Climate change has also put an additional six million homes in Utah, Idaho, Vermont, and Tennessee now at risk of flooding, too. None had previously been required to carry flood insurance. But times have changed.

So, for those who still don’t believe in climate change and sea level rise, take note. Your insurance company sure does.


A regular contributor to HPAC Engineering and a member of its editorial advisory board since 2012, Larry Clark, LEED AP, O+M, is a principal at Sustainable Performance Solutions LLC, a south Florida-based engineering firm focusing on energy and sustainability. Email him at [email protected].

About the Author

Larry Clark

A member of HPAC Engineering’s Editorial Advisory Board, Lawrence (Larry) Clark, QCxP, GGP, LEED AP+, is principal of Sustainable Performance Solutions LLC, a South Florida-based engineering firm focused on energy and sustainability consulting. He has more than two dozen published articles on HVAC- and energy-related topics to his credit and frequently lectures on green-building best practices, central-energy-plant optimization, and demand-controlled ventilation.