Upcoming Changes to the NFIP – Recent Flood Insurance Legislation Will Affect Subsidized Rates for Pre-FIRM Buildings
The Biggert-Waters Flood Insurance Reform Act of 2012 (BW-12), which was signed into law on July 6, 2012, requires FEMA to take steps to eliminate a variety of existing flood insurance subsidies and calls for a number of changes in how the program operates. Here is some information about these changes.
Change starts January 1, 2013
Subsidized premium rates for pre-Flood Insurance Rate Map (pre-FIRM) non-primary residences in Special Flood Hazard Areas (SFHAs) will begin to increase by 25 percent a year until they reflect full-risk rates. A pre-FIRM building is one that was built before the community’s first flood map became effective and has not been substantially damaged or improved.
Read WYO Bulletin W-12043.
There will be more changes in the future
Some older residences in high-risk zones have been receiving subsidized insurance rates based on their pre-FIRM status. Subsidies will be phased out for severe repetitive loss properties consisting of 1-4 residences, business properties, and properties that have incurred flood-related damages where claims payments exceed the fair market value.
Please keep in mind, FEMA is still determining how this legislation will be implemented, so please keep in touch with your Write Your Own insurance (WYO) Company for underwriting assistance.
Read WYO Bulletin W-12109.
Changes already in effect – wildfire 30-day waiting period exception
Some changes went into effect the day BW-12 became law. BW-12 also includes an exception to the 30-day waiting period for coverage of wildfire-related flood damage. The policyholder’s damage must be due to flooding on Federal land caused, or exacerbated, by post-wildfire conditions on Federal land. This 30-day exception was implemented July 10, 2012.
Read WYO Bulletins W-12045 and W-12079.
BW-12 also establishes an alternative effective date for flood insurance policies that were purchased on properties in the Missouri Basin between May 1, 2011, and June 6, 2011, and were impacted by the Flood in Progress exclusion. This change was implemented on October 19, 2012.
Read WYO Bulletins W-11034 and W-12080.
Agents should, as always, keep in mind the need to work with the WYO Companies to know how they are handling the specifics of these changes and how they maybe notifying their insureds.
What is a Primary Residence?
For flood insurance rating purposes, a primary residence is a building that will be lived in by the insured or the insured’s spouse for at least 80 percent of the 365 days following the policy effective date. If the building will be lived in for less than 80 percent of the policy year, it is considered a non-primary residence.
For more information, please refer to Agents on the Floodsmart website or the Resource Library to stay up to date on all upcoming NFIP changes and how they affect you.