Houston residents might be in for a financial break when it comes to flood insurance costs, as the city gears up to snag a better discount rate from the National Flood Insurance Program (NFIP) managed by FEMA. On the heels of recent weather calamities, Houston has undertaken significant steps towards mitigating flood risks, potentially leading to discounts on flood insurance premiums as large as 30%. Such savings are on the docket after the Houston City Council approved a watershed master plan, which is believed to bump the city's class rating in the NFIP's Community Rating System (CRS).
This watershed master plan, as reported by the Insurance Journal, is a comprehensive assessment of the city's watersheds, scrutinizing both current development and runoff conditions, as well as charting plans for future development and drainage handling. It stands as the final hurdle for Houston to ascend from a Class 5 to a Class 4 status in the CRS. Houston's proactive flood defense measures aim not just to lower insurance rates but to significatively reduce potential future flood damage.
The Community Rating System offers incentives to communities that go above and beyond in terms of flood prevention and education. Richard Smith, the interim director of Houston Public Works, stated in a meeting with the City Council that savings resulting from the reclassification are expected to take effect by April 1, 2025. This follows FEMA's annual audit which will factor in the watershed master plan and is projected to wrap up around mid-August.
The anticipated reclassification has real implications for Houston, which has been classified as a Class 5 community since 2009, thereby providing locals with a 25% discount on premiums. Moving to Class 4 could bump that reduction to 30%. "We're acutely aware of the risk of the hurricane season," said Tak Makino of the consulting firm Lockwood, Andrews & Newnam in a statement obtained by the Houston Chronicle. He emphasized the potential for lower insurance costs to influence residents to consider whether to maintain or purchase new flood insurance policies.
These adjustments arrive after a storied history of flooding in Houston, most notably Hurricane Harvey in 2017—which inflicted unprecedented damage—and more recent events like the downpour in May and Hurricane Beryl's causing mayhem earlier in the month. The Houston Chronicle detailed that, in 2023, NFIP policyholders in Houston collectively saved about $14 million through existing discounts, highlighting the tangible benefits of effective flood management and the CRS program.
Policyholders don't need to do anything to receive the extra discount; it will automatically apply to both new and existing policies come next renewal period. It's suggested, however, that policyholders discuss the changes with their agents to fully understand the upcoming financial shifts. As Houston positions itself to join the ranks of communities who have achieved a Class 4 rating or higher.
