FEMA Proposes Revisions to National Flood Insurance Plan to Increase Climate Resilience

On February 6, 2024, in recognition of the increased flooding and flood risk caused by climate change, the Federal Emergency Management Agency (FEMA) proposed updates to the "Standard Flood Insurance Policy" issued under the National Flood Insurance Program (NFIP).

In 1968 Congress Passed the National Flood Insurance Act (NFIA), which, as amended, directs FEMA to set terms and conditions for flood insurance issued under the NFIP. Today, FEMA administers the NFIP, underwrites NFIP policies, and oversees the more than 50 private insurance companies that offer flood insurance under the NFIP. FEMA establishes the terms and conditions of NFIP policies through a "Standard Flood Insurance Policy," which is adopted in regulation. The current Standard Flood Insurance Policy was adopted in 2000. In the current proposed rulemaking, FEMA has proposed a new policy form, the "Homeowner Flood Form," and a set of accompanying policy endorsements.

Many of the changes proposed by FEMA are designed to modernize NFIP policies to make them more readable by policyholders, agents, and claims adjusters, and to increase public awareness of the program. These changes are, in part, intended to increase climate resilience by increasing the number of homes covered by flood insurance. However, some elements of the proposed rulemaking also encourage physical adaptation. Significantly, FEMA's proposed rulemaking would encourage policyholders to rebuild flood-damaged properties to a more resilient standard. In particular, FEMA has proposed to "shift the default loss settlement from actual cash value to replacement cost value," and allow homeowners to recoup costs for "flood damage resistant materials." In addition, FEMA's proposed rulemaking would allow policyholders who are rebuilding after a flood to recoup some of the expenses associated with moving at-risk machinery and equipment out of flood-prone zones.

FEMA is accepting comments on this notice of proposed rulemaking until April 8, 2024.