The Capitalisation of Flood Insurance Premiums Housing Market Segmentation under Risk Rating 2.0

Abstract

This study investigates the relationship between Florida single-family home values and flood insurance premiums in 2016–2025, critically assessing the transition of the National Flood Insurance Program (NFIP) to Risk Rating 2.0. Unlike prior literature focused on the legacy system, this analysis interprets market reactions to the new household-specific risk-pricing framework. The primary finding reveals that for households in non-Special Flood Hazard Areas (non-SFHA) with only NFIP flood insurance policies, a $100 annual premium increase results in a 0.70% decrease in home value. Further, the majority of the market undercapitalises these future premium obligations, indicating persistent unpriced climate risk within Florida’s housing market.