National Flood Insurance Program Making Sense of April 2019 Changes

National Flood Insurance Program Making Sense of April 2019 Changes

Foreword The National Flood Insurance Program (NFIP) provides an important means for property owners to protect themselves financially from damages caused by flooding. Since the NFIP s inception, Congress updates legislation to help strengthen the program, ensure its fiscal soundness and inform its mapping and insurance rate-setting through expert consultation, reports and studies. Considering the major flooding events that have struck our nation, NFIP reauthorization, and ongoing flood map changes, we understand that navigating flood insurance can be complex. Our NFIP ebook series is designed for our WYO carrier partners and insurance agents to help you make sense of recent changes so you can help your clients make informed decisions. Be sure to refer to WYO Memorandum #18021a and the NFIP Flood Insurance Manual for official policy information and guidelines. It is our goal that by helping you gain a better understanding of the NFIP program you can continue to make a difference in your clients lives as they protect what matters most. National Flood Services LLC 555 Corporate Drive, Kalispell, MT 59901 www.nationalfloodservices.com (406) 756-8656

Table of Contents Changes Effective January 1, 2019 Changes Effective January 1, 2019 Changes Effective April 1, 2019 Premium Increases 06 Increased Cost of Compliance (ICC) Increases No Rate Changes Primary Residence Guidance Severe Repetitive Loss (SRL) Changes Effective January 1, 2020 Looking Forward to 2020

Changes Effective January 1, 2019 Changes Effective January 1, 2019 Special Flood Hazard Area 8% INCREASE 8% INCREASE 15% INCREASE Preferred Risk Policies (PRPs) A99 and AR Zone Policies eligible for the PRP Properties Newly Mapped into the Special Flood Hazard Area (SFHA) An area having special flood, mudflow or Preferred flood-related Risk erosion Policies hazards and shown on a Flood Hazard Boundary Map (FHBM) or a Flood Insurance A Rate lower-cost Map (FIRM) Standard Zone Flood A, AO, Insurance A1-A30, AE, Policy A99, (SFIP) AH, written AR, AR/A, under AR/AE, the AR/AH, Dwelling AR/AO, Form AR/A1-A30, or General Property V1-V30, VE Form. V. It For offers the fixed purpose combinations of determining of building/contents Community Rating coverage System (CRS) limits premium or contents-only coverage. discounts, The all AR PRP and is available A99 zones for are property treated located as in non-sfhas. B, C and X Zones in Regular Program communities that meets eligibility requirements based on the property s flood loss history. It is also available for buildings that are eligible under the PRP Eligibility Extension. Newly Mapped policies are charged PRP premiums during the first year following the effective date of the map change. Click on underlined text for definitions 04

Changes Effective January 1, 2019 Annual increases to these policies result from the use of a multiplier which varies by the year of the map change. This multiplier is applied to the base premium before adding the Increased Cost of Compliance (ICC) premiums. The Reserve Fund Assessment (RFA) is added after the ICC premium, and this subtotal is the amount subject to the annual premium rate increase cap. The Homeowner Flood Insurance Affordability Act of 2014 (HFIAA) surcharge, probation surcharge (if applicable), and the Federal Policy Fee (FPF) is added to the premium; they are not subject to the cap on annual premium rate increases. Increased Cost of Compliance ICC coverage is included under the NFIP Standard Flood Insurance Policy (SFIP). ICC helps policyholders Federal with the costs incurred if they are required by Policy the community Fee building department to Reserve meet rebuilding Fund Assessment standards after a flood. ICC Probation coverage provides up to $30,000 to help pay for relocating, An amount elevating, dedicated demolishing, to the NFIP Reserve and Fund as HFIAA Surcharge floodproofing authorized by (non-residential the Biggert-Waters buildings), Flood Insurance or any combination Reform Act of of 2012 these (BW12). mitigation activities. Calculate and add RFA The ICC portion of the claim is handled separately ICC Premium from the building and/or contents portion of the Federal Policy Fee (FPF) claim. However, the combination of payments Apply Multiplier cannot exceed the maximum coverage limits A flat charge that the policyholder must pay on available through the NFIP. For example, a each new Base or renewal Preminumpolicy to defray certain policyholder cannot receive more than $250,000 administrative expenses incurred in carrying out in claim payments for a residential building. the NFIP. Newly Mapped Rating Methodology Change Click on underlined text for definitions 05

Changes Effective April 1, 2019 Premium Increases Reminder: Substantially Improved A building is either Pre-FIRM or A, A1-30, AE, AH, Post-FIRM AO, AR, AR/A, depending AR/A1-30, on when it AR/AE, A building AR/AH, that has AR/AO, was undergone constructed V1-30, reconstruction, VE or whether it had Primary rehabilitation, Residences addition, substantial or other improvements. improvement, the Flood cost of hazard which areas equals Post-FIRM identified or exceeds buildings on 50 the percent Flood are those Insurance of the that A Rate market single Map value family are of building, identified the were building condominium constructed as a Special before Flood the unit, or had "start Hazard of apartment Area construction" unit, (SFHA). SFHA of or the unit substantial are improvement. within a cooperative defined improvement as the This area term that after does will building be not inundated include that a will building be lived by the December flood that in event has by 31, undergone the policyholder or having 1974, or a 1-percent on or after the Primary Residences +7.3% chance reconstruction, policyholder's of being rehabilitation, spouse for: equaled the effective or exceeded addition, date of in the or any other given Pre-FlRM Subsidized Policies - Non-Primary Residences +24% Pre-FlRM year. improvement The 1-percent related communities annual to: chance initial flood Flood is also SFHA Zones (A, A1-30, AE, AH, AO, 1. More than 50 percent of the 365 calendar days Substantially Improved +24% referred to as the base Insurance flood Rate or 100-year Map (FIRM), flood. AR, AR/A, AR/A1-30, AR/AE, AR/AH, AR/AO, V1-30, VE ) Non-Residential Business +24% A SFHAs 1. building following Any are project for which the labeled or current whichever as improvement Zone construction policy effective A, is Zone later. of or AO, a substantial building date; Zone AH, to or improvement Zones correct A1-A30, existing occurred Zone violations AE, on Zone or before A99, of a state Zone December or AR, local Zone 31, 1974 2. AR/AE, health, 50% or Zone before sanitary, less AR/AO, the of the effective Zone or 365 safety calendar AR/A1-A30, date code of specifications an days Zone initial following AR/A, Flood A99 A99 and AR +5% Insurance the Zone that current V, Zone have Rate VE, been Map policy and (FIRM). identified effective Zones V1-V30. by date the if Moderate local the code Other Subsidized Policies AR policyholder flood enforcement has hazard areas, official Note: only labeled and one Zone which residence B or are Zone the and does These Standard X not are lease areas Rated that of X special Zone residence flood to hazard another where (shaded) minimum are also necessary shown on to assure the FIRM, safe and living party or use are the V Zones +6% enough Areas that as progress rental result or from has This income been the decertification year's property made Post-FIRM the any of V Zone time a rate Post-FIRM V Zones areas conditions; between the or construction previously limits of the base flood and the Post-FIRM A structure during accredited located the of a policy protection in a flood B, C, 0.2-percent-annual-chance increases term. protection system, or X zone such system may as not dikes, that be is (or are 500-year) a result of flood. the Heinz dams, determined eligible and for levees, the to be PRP in to policy the consider process due it to complete of loss being history. restored for In The areas 2. Any of minimal alteration flood Center's of a hazard, "historic Erosion which building," Zone are the Study, provided areas A1-30 AE +4% Post-FIRM A Zones insurance to A these policyholder building provide cases, rating base for the which and flood policy purposes. outside that the the SFHA alteration and which the construction protection. would policyholder's Zone be A99 written Mandatory substantial may on higher will clearly not than preclude indicates spouse only the flood the elevation the that current may be of AH, AHB, AO, AOB No change not used insurance improvement standard collectively when form. purchase the occurred Rarely, flood have requirements the 0.2-percent-annual-chance structure's continued rates more protection a after policyholder significantly than December designation one system and may flood, underestimate primary floodplain has 31, opt reached 1974 to are as labeled a "historic Unnumbered A +4% residence. specified management or have on their or after statutory PRP the standards eligible effective progress property apply. date toward of written an completion. initial on the Flood No Zone building". C or Zone X the (unshaded). increasing hazard from steadily Base Insurance standard Flood form Rate Elevations as Map the (FIRM), premium (BFEs) whichever or is depths lower. are is This later. shown. is not eroding coastlines. X Zone +1% Standard Rated X Zone Mandatory common. flood insurance purchase requirements and floodplain management standards apply. Click on underlined text for definitions 06 NFIP premiums increased 8.2% overall. Here is how increases break down by flood zone:

Changes Effective April 1, 2019 Increased Cost of Compliance (ICC) Increases ICC premiums Overall increase 3% PRP/Newly Mapped $8 (up to $230,000 on 1-4 family building; up to $480,000 on Other Residential and Non-Residential building); $6 ($230,001 to $250,000 on 1-4 Family building; $480,001 to $500,000 on Other Residential and Non-Residential building) Provisional Provisional $8 (up to $230,000 building); $6 ($230,001 to $250,000 building) A method for placing flood coverage prior to the PRP/NM - $8 PRP/NM - $6 receipt of a FEMA Elevation Certificate. 1-4 family building 1-4 family building Other Residential and Non- Residential building Other Residential and Non- Residential building Click on underlined text for definitions 07

Changes Effective April 1, 2019 No Rate Changes Tentative/Provisional Reserve Fund Assessment Mortgage Portfolio Protection Program (MPPP) Homeowner Flood Insurance Affordability Act (HFIAA) Surcharge Deductible Factors Probation Surcharge Federal Policy Fee 08

Changes Effective April 1, 2019 Agent Alert Primary Residence Guidance FEMA & NFIP will not issue retroactive refunds for past years for 2-4 family primary residence dwellings. 2-4-family dwellings are eligible for Primary Residence Homeowner Flood Insurance Affordability Act (HFIAA) surcharge Homeowner Flood Insurance Affordability Act (HFIAA) o Currently, surcharge the $25 HFIAA fee applies only to those structures that are single The family, statutory primary surcharge residence imposed by Section 1308 of the Biggert-Waters Act. o Effective 4/1/19, the $25 HFIAA fee will apply to 2-4 family primary residence dwellings (in lieu of the $250 fee prior to 4/1/19 effective date) Examples of acceptable documentation to prove Primary Residence: Signed and dated Proof of Residency request letter Driver's license including Temporary License State-issued identification cards Driving record information Automobile registration Proof of insurance for a vehicle o Temporary ID cards for a vehicle o Memorandum of Insurance for a vehicle o Binders of Insurance for a vehicle Voter's registration Policyholder must provide Primary Residence documentation that demonstrates building is primary residence The Flood Insurance Processing Center will be reaching out to impacted Policyholders to secure documentation. Click on underlined text for definitions 09

Changes Effective April 1, 2019 Severe Repetitive Loss (SRL) FEMA is introducing an additional premium charge for SRLs 5% of the annual subtotal before ICC premium. Reminder - SRL applies to any building that: 1. Is covered under a Standard Flood Insurance Policy made available under this title 2. Has incurred flood damage for which: a. Four or more separate claim payments have been made under a Standard Flood Insurance Policy (SFIP) issued pursuant to this title, with the amount of each such claim exceeding $5,000, and with the cumulative amount of such claims payments exceeding $20,000; or b. At least two separate claims payments have been made under a Standard Flood Insurance Policy, with the cumulative amount of such claim payments exceeding the fair market value of the insured building on the day before each loss. 10

Changes Effective January 1, 2020 Looking Forward to 2020 Changes Effective January 1, 2020 Preferred Risk Policies (PRPs): Premiums will increase 5% A99 and AR Zone Policies eligible for the PRP: Premiums will increase 5% Properties Newly Mapped to the SFHA: Newly Mapped policies are initially charged PRP premiums during the first year following the effective date of the map change. Annual increases to these policies result from the use of a multiplier which varies by the year of the map change. This multiplier is applied to the base premium before adding the ICC premium. The RFA is added after the ICC premium; this subtotal is the amount subject to the annual premium rate increase cap. The HFIAA surcharge, probation surcharge (if applicable) and the Federal Policy Fee (FPF) will be added to the premium: they are not: subject to the cap on annual premium rate increases. As a result of increases to the multiplier effective January 1, 2020, premiums for Newly Mapped policies will increase 15%. 11

A leader in the flood industry for more than three decades, National Flood Services provides a broad range of flood insurance options and private flood solutions designed to meet the evolving needs of property owners in today s complex regulatory environment. Making a difference in people s lives by helping protect what is important is the core value behind our efforts in helping to rebuild lives after flooding events. As we continue fostering partnerships with WYO carriers, educating insurance agents on flood risk and providing value-added policyholder services, our ultimate goal at NFS is to truly make a difference with each and every person we serve. 555 Corporate Drive Kalispell, MT 59901 (406) 756-8656 www.nationalfloodservices.com National Flood Services, LLC 2019. All rights reserved. This ebook is for general informational purposes only and is not intended to provide legal or regulatory advice. It is not intended to be a substitute for any NFIP publications. Claims figures referenced in this document are preliminary as claims are still being processed.