National Flood Insurance Program and Biggert-Waters 2012

Transcription

1 National Flood Insurance Program and Biggert-Waters 2012

2 National Flood Insurance Program NFIP was created by Congress in 1968 Coverage underwritten by the Federal Government, administered by FEMA NFIP policies are sold through any State -licensed Property and Casualty Insurance Agent Congress sets coverage limits and maximum annual rate increases More than 22,000 participating communities nationwide Community adopts and enforces local floodplain management program NFIP policies available in any participating community 2

3 NFIP Participation in Region IV 3,303 communities participate 3,290 Regular Phase 13 Emergency Phase 367 Non-participating R4-2,684,538 NFIP policies in force $626.5 billion in property coverage 3

4 NFIP Participation in Alabama 428 communities participate 427 Regular 1 Emergency 58,276 NFIP policies $12.4 billion in property coverage 61 Non-participating communities 37,727 NFIP claims paid since 1978 $956,220,293 in NFIP claims paid since

5 CRS Participation in Region IV State Alabama - 12 Florida Georgia - 45 Kentucky - 19 Mississippi - 31 North Carolina - 80 South Carolina - 41 Tennessee - 11 TOTAL Best CRS Class Alabama - 6 (2) Florida - 5 (18) Georgia - 5 (1) Kentucky - 4 (1) Mississippi - 5 (3) North Carolina - 5 (3) South Carolina - 4 (1) Tennessee - 8 (6) 5

6 Biggert Waters 2012 (BW-12) Signed into law by President Obama on July 6, 2012 Reauthorized the National Flood Insurance Program for 5 years 6

7 BW-12: What s Changing Subsidies to be phased out Non-primary residences Business properties Severe repetitive loss properties (1-4 residences), and properties where claims payments exceed fair market value New policies to be issued at full-risk rates After the sale/purchase of a property After a lapse in insurance coverage After substantial damage/improvement For properties uninsured as of BW-12 enactment Grandfathered rates planned to be phased out over 5 years 7

8 Policyholder Subsidies These policies are not Pre-FIRM subsidized (already actuarially rated), 4,480,669 policies. They are not affected by 205 but may see routine annual rate increases. NFIP Policyholders under Section 205 (data as of 12/31/2012) 81% 5% 10% 4% These pre-firm nonprimary residences, business properties, and Severe Repetitive Loss (SRL) properties (252,851 policies) will see 25% increases until the true risk premium is reached. These pre-firm primary residences (578,312 policies) will retain their subsidies until sold to new owner, policy lapse, etc. These properties, which include pre-firm condos and multifamily properties (244,085 policies) will not see immediate subsidy removal. 8

9 Policyholder Subsidies 9

10 Changes for Non-Primary Residences Rates will increase 25 percent per year until they reflect the fullrisk rate Changes effective January 1, 2013, at policy renewal Pre-FIRM: Built before or the community s first Flood Insurance Rate Map became effective and has not been substantially damaged or improved Non-primary residence: A building that will be lived in by the insured or their spouse for less than 80 percent of the year 10

11 Changes to Other Subsidized Rates Rates on pre-firm commercial buildings Increase by 25% a year until they reach full-risk rates Rates for repetitively flooded buildings (known as Severe Repetitive Loss properties) of one to four family residences increase 25% a year until they reach full-risk rates Includes buildings with cumulative flood insurance payments that meet or exceed fair market value These changes started October 1,

12 For Pre-FIRM Residences - Direct Move to Full-Risk Rates After the sale/purchase of a property Subsidized rates can no longer be assigned to the new owner After a policy lapse Policyholders should know that allowing a policy to lapse could be costly When a new policy is issued Policies for buildings uninsured as of the date BW-12 was enacted These changes started October 1,

13 Historic Structures and BW-12 Historical structure that is primary residence: Retain pre-firm subsidized rates until it is sold, policy lapses, new policy is issued, or it becomes a severe repetitive loss Subject to annual rate adjustments and fee for Reserve Fund Must maintain continuous coverage Historical structure that is non-residential, phase-in of actuarial rates started October 1, 2013 Substantial improvement /substantial damage subject to full actuarial rates 13

14 PRP Eligibility Extension Changes Premiums will increase for properties insured by the Preferred Risk Policy (PRP) Eligibility Extension, which allows structures mapped into a high-risk area to remain insured at lower PRP rates. Premiums for properties mapped into Special Flood Hazard Areas (SFHAs) on or after Oct. 1, 2008, and receiving the PRP Eligibility Extension will see average annual increases of 20 percent Became effective October 1,

15 Impact on NFIP Policies New and renewal policies will have to complete a new policy application to capture Is this Insured s Primary Residence Y/N Supporting documentation will be required FIRM, EC, LOMC Waiver of 30-day waiting per due to flooding on Federal Lands as a result of Wildfire does not apply to policy inception, but at time of loss - eligibility determined by adjuster Will be required to submit documentation to confirm continued eligibility for PRP policy (may require community sign-off) Primary residence is defined as the building the insured or the insured s spouse resides in for at least 80% of the 365 days following the policy effective date 15

16 What About Grandfathering? Grandfathering will be phased out BW-12 calls for a phase-out of discounts, including grandfathering provisions, and a move to full actuarial rates The Biggert-Waters Act Section calls for phase-out of grandfathering discounts for properties shown on Flood Insurance Rate Maps that are updated New rates will be gradually phased in at 20% per year for five years Section implementation anticipated in late 2014 Phase-in to full-risk rates anticipated to begin in late

17 The House at 370 Waterview Drive 1) Residential property 2) Located in a Special Flood Hazard Area 3) Current owners have flood insurance 17

18 Scenario #1: Buying the House THEN Flood insurance required Subsidized rates apply to pre-firm buildings Lower Grandfathered rate continues to apply if policy is transferred to new owner For Sale NOW Flood insurance required Full-risk rates apply, not pre- FIRM subsidized rates Post-FIRM Grandfathering applies until/unless FIRM maps change Plan ahead: consider flood risk as you plan and budget Obtain an Elevation Certificate (EC) as soon as possible to learn your fullrisk rate you could save money 18

19 Scenario #2: Selling the House THEN Avoid surprises at closing let buyers know they will need flood insurance Help the buyer: assign your policy so the new owner can continue to receive any subsidized or discounted rate NOW Avoid surprises at closing let buyers know they will need flood insurance Pre-FIRM Subsidized rates no longer apply; new owner will pay full-risk rate New owner can often keep post-firm Grandfathered rate, until next map change Consider getting an EC and show flood insurance costs risk and rates could be lower than anticipated and allows potential buyer to understand expenses Consider mitigating, including elevating, before listing the home for sale 19

20 Scenario #3: Building/Rebuilding a New Home in a Special Flood Hazard Area THEN Be aware of building in a high-risk flood zone Need to build to current building code requirements Flood insurance premium will be based on elevation at or above FEMA s minimum elevation standard; the community s standard might be higher NOW Be aware of building in a high-risk flood zone Flood risk changes over time, so consider current and future flood risks Build higher/stronger than current standards to lower flood risk and insurance premiums Talk to local floodplain manager to learn about new maps or data that may be available Building higher may increase home value 20

21 Scenario #4: Policy Renewal (Full-Risk or Grandfathered) THEN Renew the policy at the same rate Rates subject to routine actuarial adjustment NOW Renew the policy at the same (full-risk) rate Rates subject to routine actuarial adjustment plus increase for the Reserve Fund If Grandfathered, talk to your agent to learn your current risk 21

22 Scenario #5: Policy Renewal Pre- FIRM (Subsidized) Primary Home THEN Don t get caught without coverage in a disaster; stay fully insured Renew flood insurance policy at the pre-firm (subsidized) rate Pre-FIRM rates subject to routine actuarial adjustment NOW Retain subsidized rate as long as home is a primary residence and continuous coverage is maintained Rates subject to routine actuarial adjustment plus increase for Reserve Fund Full-risk rates will apply if the property sold or the policy lapses (effective October 2013) 22

23 Scenario #6: Policy Renewal (Subsidized) Secondary/SRL Home THEN Don t get caught without coverage in a disaster; stay insured Renew flood insurance policy at the current (subsidized) rate Rates subject to routine actuarial adjustment NOW Previous premium did not reflect the home s full flood risk Premium will increase 25 percent a year until it reaches the full-risk rate Rates subject to routine actuarial adjustment plus increase for Reserve Fund Obtain an Elevation Certificate (EC) as soon as possible to learn your fullrisk rate you could save money 23

24 Scenario #7: Receiving Map Updates THEN New maps could identify that flood risk has changed Buy flood insurance now to receive low preferred risk rates in moderate-to-low risk areas Having a policy in place allows it to be Grandfathered In at a lower rate when maps are adopted NOW New maps could identify that flood risk has changed As maps change, discounts, including Grandfathering, will be phased out New rates will be phased in at 20 percent a year for five years Implementation anticipated in

25 Community Rating System (CRS) Voluntary program for participating communities that enforce higher standards than the minimum NFIP standards CRS encourages comprehensive floodplain management CRS program provides incentives through premium discounts 18 classes of CRS activities that receive credits All communities start at a CRS Class 10; for each 500 points earned the community drops a CRS class, which earns a 5% discount on every flood policy in the SFHA A CRS Class 1 receives a 45% premium discount in the SFHA 25

26 CRS in Alabama 12 Alabama communities participate in CRS Birmingham, Baldwin County CRS Class 6 (20% discount in the SFHA) Orange Beach CRS Class 7 (15% discount in the SFHA) Dauphin Island, Gulf Shores, Huntsville, Pell City, Prattville CRS Class 8 (10% discount in the SFHA) Atmore, Homewood, Hoover, Wetumpka CRS Class 9 (5% discount in the SFHA) 26

27 How to reduce premiums through mitigation actions Existing Post-FIRM structures (built after or the date of the communities first Flood Insurance Rate Map (FIRM)) - Verify if structure has adequate flood openings in any Zone A for areas below the base flood elevation (including enclosures or garage areas) Elevate machinery and equipment servicing the structure water heater, HVAC, furnace, etc. Areas below lowest floor are unfinished and flood resistant and used only for storage, parking of vehicles, and building access 27

28 How to reduce flood insurance premiums V-Zone (coastal) limit enclosures to 299 square feet or less V-Zone building receive the best rates when the area below the elevated floor is free of obstruction V-Zone enclosures below base flood elevation must have certified breakaway walls or be free from obstruction V-Zone used only for storage, parking, and building access 28

29 How to reduce flood insurance premiums Pre-FIRM structures (built before or the date of the communities first FIRM) Obtain an elevation certificate If owner is doing any type of improvement, consider elevating the structure Add flood openings in A Zones to crawlspace, garage, or enclosure Elevate utility equipment 29

30 How to reduce flood insurance premiums New and improved buildings -- Consider adding freeboard (additional height above the BFE) -- every foot above the BFE lowers the insurance premium Consider limiting the size of enclosures below the BFE by updating the ordinance Consider lowering the substantial improvement or substantial damage threshold from 50% to 30% in the ordinance; or adopt a cumulative substantial improvement provision 30

31 How to reduce flood insurance premiums Select a higher deductible on the flood insurance policy Reduces the premium Requires approval of mortgage lender Requires more out-of-pocket expense when a flood loss occurs 31

32 Resources Fact Sheets - Flood Insurance Reform Act Webpage - FloodSmart for Consumers - FloodSmart for Agents Flood Insurance Manual - Risk Communication Guidebook for Local Officials

33 Contacts FEMA, Region 4 Corey Garyotis, PE, CFM, Alabama NFIP State Coordinator , corey.garyotis@adeca.alabama.gov Susan Wilson, Floodplain Management & Insurance, , susan.wilson@fema.dhs.gov Janice Mitchell, Insurance Specialist, , janice.mitchell@fema.dhs.gov 33

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