In 2021, FEMA introduced Risk Rating 2.0, the National Flood Insurance Program still carries about $2.6 bn in annual premium subsidies, according to Neptune Flood Research Group. The remaining discounts are concentrated heavily among long-standing policyholders, non-primary residences and higher-value properties.
FEMA introduced Risk Rating 2.0 in October 2021, replacing much of the program’s flood-zone-based pricing with property-specific rates intended to reflect individual flood risk more closely.
New policies moved immediately to the revised pricing structure, while existing policyholders transition gradually under an annual premium increase cap of 18%.
That transition creates the remaining gap between what some policyholders currently pay and their estimated full-risk premium. Neptune found that more than half of NFIP policies now pay full-risk rates, compared with about one-third in December 2022.
Approximately 1.5 mn policies, or 42% of the program, remain below full-risk pricing. Those policies account for about $2.6 bn in annual subsidies, according to the report.
Non-primary properties receive a disproportionate share of the remaining support. Second homes, rental properties and businesses represent 28% of policies but account for 42% of subsidy dollars.
Higher-value properties also receive a substantial portion. Buildings with replacement costs above $1 mn make up about 4% of the NFIP book but receive at least 17% of the remaining subsidy.
The most heavily subsidized category consists of non-primary single-family homes valued at $1 mn or more. Neptune found that 68% of those properties remain below full-risk pricing and, in aggregate, pay less than half of their estimated full-risk cost.
The distribution also varies by household income at the census-tract level. The lowest-income fifth of census tracts receives 15.8% of subsidy dollars, equal to approximately $419 mn annually.
That group also receives the smallest average effective discount. Premiums are about 27% below full-risk rates in the lowest-income quintile, compared with discounts of roughly 33% to 36% across the upper three quintiles.
Neptune’s data indicates that tenure in the program is a stronger predictor of remaining subsidy than income. Policyholders who have been insured for at least five years, or who entered the NFIP before Risk Rating 2.0, represent 62% of policies but receive more than 83% of subsidy dollars.
That cohort receives approximately $2.2 bn in annual premium support. The concentration reflects the gradual transition rules that protect existing policyholders from immediate movement to full-risk pricing.
Florida accounts for the largest geographic share of the remaining subsidy. The state receives about $1.25 bn annually, or approximately 48% of the national total, across roughly 507,700 subsidized policies.
The average gap between current and full-risk premiums in Florida is $2,474. Neptune said that figure is 43% higher than the national average.
The concentration becomes sharper at county level. Lee and Collier counties together account for approximately $422 mn in annual subsidies, equal to about 16% of the national total.
In Collier County, 76.8% of NFIP policies remain subsidized. The average gap between current premiums and full-risk pricing there is $4,457.
The 25 counties receiving the largest total subsidies account for 57% of the national amount. Thirteen of those counties are located in Florida, according to Neptune.
The report estimates that the remaining subsidy could decline by half within approximately 2.6 to 3.8 years if current rules remain unchanged. It projects the total will fall below $500 mn sometime between 2032 and 2034.
Florida’s share of the remaining subsidized book is expected to increase as that transition continues. Neptune projects the state’s portion could rise from about 47% today to roughly 60% by mid-2034.
Individual policy examples show how large some remaining pricing gaps are. One Florida single-family property in an AE flood zone currently pays $856 annually against an estimated full-risk premium of $10,200.
A Florida condominium association in the same flood-zone category currently pays $5,999 per year. Neptune estimates its full-risk premium at $71,556.
The findings come as the NFIP continues to carry about $22.5 bn in debt to the US Treasury and faces declining enrollment. Lawmakers have also raised concerns about coverage losses in lower-income communities as premiums rise under Risk Rating 2.0.
Neptune’s analysis shows that much of the remaining subsidy is tied to legacy enrollment, property characteristics and geography rather than being concentrated among lower-income policyholders. Under current law, that subsidy will continue shrinking as existing policies move toward full-risk rates.
