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Changes Coming to the National Flood Insurance Program – What to Expect

Imp mpact act of ch chang nges es to the e NF NFIP P un under er Se Sect ction

• n 205

5

• f the

e Big iggert gert-Water Waters s Act ct

2

Changes are Coming to the NFIP

• Congress

ngress passed ed the e Floo

• od

d Insurance surance Reform form Ac Act of 2012 2 (Biggert gert Waters ters 2012), 2), which ch will: :

• Make the NFIP more financially stable by raising rates on certain classes of

property to reflect true flood risk; and

• Trigger rate changes for certain properties within a revised or updated map

area to accurately reflect the flood risk.

• The

e changes nges will mean an rate e increas reases es for many ny policyh cyholde

• lders

s over er time. me.

• Buy

uying ng or se sellin ling g a proper perty ty, , or allowing

• wing a p

policy cy to lapse se may trigger ger rate e changes. nges.

• There

ere are invest estme ments nts you and your ur communit mmunity y can make ke to reduce ce the e impact ct of rate e change nges. s.

3

What is Changing?

• Flood
• od insuran

urance ce rates es

• Rates for most properties will more accurately reflect risk.
• Subsidized rates for non-primary residences are being phased out now.
• Other subsidized rates will be eliminated over time:
• New policies sold after July 6, 2012 to cover previously uninsured properties; and
• Purchase of a property, allowing a policy to lapse, repetitive loss or cumulative damage,
• r other events, could trigger rate changes beginning in 2013.
• When a community adopts a new flood map, discounts like grandfathering will be

phased out – meaning premiums will increase over time. Expected in 2014

• Flood
• od risks

ks and the costs ts of floodin

• oding
• Weather patterns, erosion, and development are a few factors increasing flood

risk in many communities.

• Better science, improved tools and more data are providing more accurate

definition of flood hazards.

• More buildings and other infrastructure are being built in areas at risk for flooding

and replacement costs continue to grow.

4

Who Will Be Affected by Subsidy Changes?

• Not

t ever veryon yone e – only 20% of NFIP policies receive subsidies – and an even smaller number will see immediate changes.

• Owners of subsidized non-pr

prima imary ry reside sidenc nces s in a Special Flood Hazard Area will see 25% increase annually until rates reflect true risk – began January 1, 2013.

• Owners of subsidized propert

erty y that has exper perien ienced ced severe vere repet petit itive ve flood

• od losse

ses or that has incurred flood cumulative damage with flood insurance payments exceeding the value of the structure will see 25% rate increase annually until rates reflect true risk – beginning late 2013.

• Owners of subsidized bus

usine ness ss proper perti ties es in a Speci cial l Flood

• od Hazard

rd Ar Area will see 25% rate increase annually until rates reflect true risk -- beginning late 2013.

• Owners of substantially damaged or substantially improved subsidized

property will see 25% rate increase.

5

Who Won’t Be Affected by Subsidy Changes?

• Ow

Owners ners of primar ary y reside dence nces in SFHAs As will be able e to keep eep their eir sub ubsi sidi dize zed d rates es un unless ess or un until: l:

• You sell your property (new rates will be charged to next owner if they insure;)
• You allow your policy to lapse;
• You suffer severe, repeated flood losses; or,
• You purchase a new policy (after July 6, 2012).

6

When Will Changes Occur?

• Now
• w – Changes

nges un underwa derway: y:

• Full-risk rates will apply to property not previously insured, newly purchased,
• r to a policy which is repurchased after a lapse.
• Premiums for older (pre-FIRM) non-primary residences in a Special Flood

Hazard Area will increase by 25 percent each year until they reflect the full- risk rate – began January 1, 2013.

• Later

ter in 2013: 3:

• Premiums for pre-FIRM business properties, severe repetitive loss properties

(1-4 residences), and properties where claims payments exceed fair market value will increase by 25 percent each year until they reflect the full-risk rate.

• Normal rate revisions which occur annually, and increases will include a 5%

assessment to build a catastrophic reserve fund.

• Late

te 2014: 4:

• Premiums for properties affected by map changes will increase over five

years at a rate of 20 percent per year to reach full-risk rates.

7

Why the Changes to the NFIP?

• 1968

1968: : Congress ngress creat ated ed the e NFIP FIP to make ke affordable

• rdable flood
• od insura

uranc nce genera nerall lly y available able (flood damage is not covered by most homeowners’ insu sura rance nce policies ies)and )and to decre rease Feder ederal l disa saste ter r ass ssistanc tance expenditure penditures. s.

• To partici

cipat ate, e, comm mmun unit ities ies adopt pt and enforce force flood

• dplain

lain mana nagem gemen ent t meas asures ures for r all new w devel velopme

• pment.

nt.

• For

r struc uctu tures res bui uilt t befo fore re FEM EMA A mapped ed the e Speci cial al Flood

• od Hazard

rd Ar Area (SFHA) FHA) (called led pre-FIRM IRM proper perti ties), es), the e NFIP FIP made de flood

• d insuran

urance ce available able at sub ubsidized idized rates es that t did d not t reflect lect the e true ue risk k of flood

• ding

ing .

• 45 years

rs later: r: Flood

• od risk

sks conti tinue, nue, and the e costs sts and consequ nsequen ences ces of floodin

• oding

g are increa reasi sing. ng.

• Ar

Artifi fici cially ally low w rates es and d discounts counts no longer nger are sus ustai aina nable. ble.

• In 2012,

2, Congress ngress passed sed legisl slati tion

• n to make

ke the e program ram more re sus ustain ainable able and financi ancially ally soun und over er the e long g term. rm.

8

What Can I Do to Lower Costs?

• Home

me and bus usiness iness owne ners: s:

• Talk to your insurance agent about your insurance options
• You’ll probably need an Elevation Certificate to determine your correct rate
• Higher deductibles might lower your premium
• Consider remodeling or rebuilding
• Building or rebuilding higher will lower your risk and could reduce your premium
• Consider adding vents to your foundation or using breakaway walls
• Talk with local officials about community-wide mitigation steps
• Comm

mmuni nity ty leaders ders:

• Consider joining the Community Rating System (CRS) or increasing your CRS

activities to lower premiums for residents.

• Talk to your state about grants. FEMA issues grants to states which can

distribute the funds to communities to help with mitigation and rebuilding.

9

What Do I Need to Remember?

• Many

y changes nges are coming ming to the e Flood

• od Insur

surance ance progra ram

• Congress acted to make program stronger financially.
• On many

y more re policies cies, , flood

• d insuran

urance ce rates es will reflect lect ful ull risk. k.

• Insurance rates will rise on some policies; and
• There are specific actions which will trigger rate changes.
• Talk to your

ur insuran urance ce agent nt about ut how w changes nges may y affect ect your ur propert perty y and flood

• d insuran

urance ce policy. cy.

• Bui

uilding ding or rebu buil ildi ding ng higher her can lower wer your flood

• d risk

sk and coul uld d sa save e you u mon

• ney.

ey.

• FEM

EMA A can help lp comm mmuni niti ties es lowe wer flood

• d risk

k and flood

• d insuran

urance ce premiu miums ms through: rough:

• CRS program;
• Various mitigation grants; and
• Technical advice on building and rebuilding to mitigate future flood damage.