April 2015 Changes: Flood Insurance
June 18, 2015
Written by: Edie Lohmann
NFIP Insurance Specialist at FEMA Region IX
The National Flood Insurance Program (NFIP) implemented congressionally mandated reforms required by the Homeowner Flood Insurance Affordability Act of 2014 (HFIAA) that repeal and modify the Biggert Waters Flood Insurance Reform Act of 2012 (Biggert-Waters). The new law slows some flood insurance rate increases and offers some relief to some policyholders who experienced steep flood insurance premium increases in 2013 and early 2014. Flood insurance rates and other changes were revised in April 2015. In addition to insurance rates, other changes resulting from Biggert- Waters and HFIAA were implemented that effect the total amount a policyholder pays for a flood insurance policy.
The changes include an increase in the Reserve Fund Assessment, the implementation of an annual surcharge on all new and renewed policies, an additional deductible option, and increase in the Federal Policy Fee and rate increases for most policies. Key changes include:
- Annual rate changes that set rates using rate-increase limitations set by HFIAA for individual premiums and rate class:
- Limit increases for individual premiums to 18 percent premium.
- Limit increases for average rate classes to 15 percent.
- Mandatory increases for certain subsidized policyholders under Biggert-Waters and HFIAA.
- Increase the Reserve Fund assessments required by Biggert-Waters.
- Annual surcharges required by HFIAA.
- Guidance on substantially damaged and substantially improved structures and additional rating guidance on buildings constructed before their communities’ first Flood Insurance Rate Maps (FIRM) became effective.
- A new procedure for properties newly mapped into the Special Flood Hazard Area (SFHA) and existing Preferred Risk Policy Eligibility Extension (PRP EE), a cost-saving flood insurance coverage option for property owners whose buildings were newly mapped into an SFHA. The premiums will be the same as the PRP, which offers low-cost flood insurance to owners and tenants of eligible residential and non-residential buildings located in moderate-to-low-risk areas for the first year (calculated before fees and assessments) to comply with provisions of HFIAA.
- Reformulating expense loading on premiums, reducing the expense load on the highest-risk policies as an interim step while investigating expenses on policies required by Biggert- Waters.
I will provide more recent updates relative to how these changes are relative to the REALTOR® in an upcoming issue of the Journal.