Increased flooding is changing insurance

Weather disasters are on the rise and affecting more of the population and property as a result. The number of billion-dollar disasters in a single year has increased from single digits at the start of the century to several dozen as we began the 2020s. Of all these disasters flooding is an associated threat in 90% of events. But coverage for flood damage can be trickier than many other policies, and flood insurance is expected to change as the climate changes as well.

While drought and reduced rain are a common hallmark of our warming climate, extreme precipitation events are also on the increase. The wettest days are now becoming more common and triggering record floods as a result. This is partially fueled by rising temperatures, as warmer air can hold more moisture. For every increase in a degree, the atmosphere holds an extra 4% moisture.

As flooding has increased this has changed the way insurance coverage looks. Just last year federal flood insurance, which about half of those insured against floods have, underwent a major overhaul in how flood risks are assessed. The National Flood Insurance Program (NFIP) moved to the Risk Rating 2.0 system which now calculates flood risk based on individual risk rather than flood maps. This system was intended to more equitably charge customers but raised rates for nearly 70% of NFIP policyholders. Despite these changes, FEMA still estimates that 1 in 5 people who have flood insurance will drop their policy by the end of the century due to increasing costs.