The Distributional Impact of FEMA's Community Rating System

CRS incentivizes investments in risk reduction above NFIP standards using insurance premium discounts. These discounts are subsidized by increasing premiums in non-CRS communities. We examine the distributional impact of this cross-subsidization process. We find that redistribution does occur, but the gains and losses are not economically large with 95% of households gaining or losing no more than 0.3% of their income. We also find that the strongest predictor of gains is flood risk. Thus, CRS appears to reduce the cost of living in the riskier communities, a result that has clear policy implications if it induces sorting into riskier locations