They determine your price for your flood insurance by two main factors. One, what flood zone you're in andthen the height of your home. When I say height, the elevation incomparison to what they determined to be your 100 year flood event. There's three different flood zones. There's a flood zone X where you'renot being forced to purchase flood insurance through yourmortgage company. And then there's two other flood zones,flood zone A, which is a proximity to water, and then flood zone V, whichwould be on the water where you have the potential for storm surge. The flood insurance rate maps were verygood for the time, but currently with a flood rate, maps all risksin the same zone, with the same elevation in the same buildingtype are rated the same. The NFIP intends to release a newmapping plan called a Risk Rating 2.0. We know more about flood risk nowthan we did when the current rating methodology was put in placefour decades ago or so. And so now, because of technology,because we understand the risk better, we can create a rating methodology thatidentifies what the risk is on a property specific basis insteadof a zone basis. It's going to be a littlebit of a switch up. Some people will probably see increasesas other people see decreases, but it'll be more balanced overall. Communities are the third dimension becausethey have to adopt land use ordinances to managetheir floodplain. Communities need to fulfill the requirementsand show that they've actually adhered to and are making progressin terms of making themselves more flood resilient.
FEMA is very goodwith working with communities to help them bring their codes and ordinancesup to meet the NFIP standards. Some examples ofimprovements could be. Elevate your house if you're in aflood zone, don't put enclosures down below and convert theminto living space. You know, allow for water tofreely flow on that bottom level. Our insurance, went down almost fourthousand dollars a year just by replacing the windows. As of 2020, theNFIP is over twenty billion dollars in debt to the U.S. Treasury. But it's debt that onegovernment program owns to it another government program. And it is wholly attributable to theareas in the program that are not actuarially sound. The program was never designed to necessarilybring in all the money needed to pay for all the programs,whether that's insurance claims, the grant program, the mapping program orthe floodplain management program. And so the program is actuallyfunctioning and operating as it was designed. It just the designneeds to be updated. In 2012, the Bigger Water Act changedthe NFIP to create rates based on more information than just the floodmaps and attempted to overhaul the NFIP to ask for higher premiumsthat better match the risk. That law was amended to gradually increasethe cost over time instead of doing an adjustment in just one year. This was a big deal. We were tryingto make some progress, trying to to write and rate andprice the risk accordingly. But politics set in and in this NFIPprogram is often one of the biggest political footballs. We're I think definitelytaking steps in the right direction to get the program more fiscallysound, but it'll take a number of years once the sound financial frameworkis put in place, a number of years for us to get toa fully risk-based premium program. Although it is starting to expand,private flood insurance has been around for a while. In 1986, theNFIP started a partnership with private insurance companies through theWrite Your Own program. As of September 20, 60 insurancecompanies participate in that program. The NFIP and FEMA are theinsurance company in that situation. But it's not an insurancecompany from a traditional aspect. It's really more in the case ofit and the application of benefits. The move toward a more laissez-fairemarketplace has continued to evolve. We've seen a significant increase in marketactivity in terms of number of carriers offering. So in twenty sixteen, at aboutsixteen flood insurance carriers, now you've got about forty one. The premiums have grown from one hundredand fifty million to over five hundred million in just four years. So a lot of activity. Good. What I would call silver liningis that we are beginning to see private industry enter into this marketand hopefully we can neutralize some of those political headwinds thatcome along with the National Flood Insurance Program. TypTap isan example of that. In Florida alone, there are over ninemillion housing units and only one point seven million NFIP policies. So there's lots of opportunityfor private insurance to develop. We were already in the homeowner'sinsurance business in Florida and we received many calls from policyholderssaying, can you help us? Is there any way you can assist us? Because we're in a situation where we'renot able to afford this flood insurance premium, we're ultimately going tohave to move from our home. And with the use of technology, wefelt that there was a better, more efficient, profitable way towrite flood insurance. Specifically in Florida. A lot of private flood insurance underwritersdon't rely so much on the flood zone as they dothe buildings specific characteristics. With the application of that technologyTypTap is hoping to attract some homeowners away from the NFIPand turn a profit. Through our technology, we're able toidentify dislocations in the market and a majority of the cases offerflood insurance at a more attractive price. Even with the growth of privatemarkets that I really do think Florida is going to lead the way andI hope we see expand across the country. We're still going to have aset of structures for which the risk is high and the concentration of the numberof those in a given area is so high that the private marketplace just isnot going to be interested in that. We've got to understand thatthat we're way underinsured in the number of properties thatshould should have it. There is a huge market outthere in the high risk area. We estimate only a third of theproperties have either an NFIP or private sector flood coverage. There's a market there. So we want todo what we can to encourage the private sector to to also take part inmanaging the flood risk of the of the nation's. Private insurance companies arealso able to insure at a higher rate than the NFIP. That means more protection for homesworth over two hundred and fifty thousand dollars. But that could meanmore valuable homes built in riskier areas. For example, the average value of ahome in Miami is close to three hundred and sixtysix thousand dollars. That's the same Miami thatfloods during high tide. A report by Risky Business put 15billion to twenty three billion dollars worth of existing property inthat area underwater by 2050. I don't think Miami is goingto be underwater in my lifetime. That's not saying that we should addressit now because it's not going to get any better. You know that kingtides are going to get worse. If I can't get insurance andthe quality of life goes down. I'm not a fool. I'mnot going to stay here. But I hope it doesn't come to that. Clearly, without the National FloodInsurance Program, there would have been far more development in the highrisk area and would have been far greater losses withoutwithout the program. Has the program stoppedany unwise development? Of course not. But our floodplainmanagement regulations do save one hundred million dollarsin losses avoided. The NFIB also encourages communitiesand individuals who have experienced multiple flooding events to work on resiliencyand aids them if they are considering a buyoutprovided by FEMA. It's also has to be determined what iswhat is still do from from a mortgage standpoint and that that home, ifnot fixed, would have a lower probability of of being sold. You can't convince me that property valueshave gone down and you can't convince people that people don't want tobuy homes and live here because they're buying like crazy. There's noincentivization to move if you're paying rates that aren't actually basedon risk, they're based on political judgment. Investing in the resiliency required by theinsurers can save lots of money and heartache. You can get intothese communities, you can educate them, you can inform them and help themunderstand what better building can do. That's really one of the keys. For every dollar spent on beingresilient, you save seven dollars and recovery. Closing the insurance gapwill certainly help protect property owners living in harm's way. But that could just be aBand-Aid for the much larger issue.
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