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Just the basics: NFIP 2012 Flood Reforms

What do we need to know? What should property owners do? What should agents do?

Basics: NFIP 2012 Flood Reforms • Flood reforms have been enacted in 2012 • Property owners need to know • Agents can be prepared to address B-W changes • Agents should be able to explain additional changes to the NFIP each year in May and October. 2

NFIP Actuarial Rating: Past FEMA started NFIP in 1968 to reduce flood-related disaster costs – Offers flood insurance in exchange for local floodplain management, established flood maps, – At inception, high risk properties built before the NFIP were exempted or grandfathered from actuarial rate premiums – Low to moderate risk properties given Preferred Risk Rates – Across the US 20% of properties in high risk flood zones (A or V) pay non-actuarial or subsidized insurance premiums 1.1 million of the 5.5 million covered.


NFIP Actuarial Rating: Present July 2012: Congress passed Biggert-Waters Flood Reforms – NFIP should collect premiums to cover flood claims – Directs NFIP to use actuarial principles in rating policies – Phases out and removes premium subsidies from high risk properties-Pre-FIRM. – Subsidies can account for 40% to 70% of a high risk, Pre-FIRM policy’s premium


Source: FEMA

Basics: NFIP Terms • Actuarial premiums = “non-subsidized” = premiums based on risk = Post-FIRM A or V zones – rated using elevation figures for that structure

• Non-actuarial premiums = “subsidized” = based on nonflood risk considerations = PreFIRM A or V zones – rated with exemptions due to date of construction – Considered “subsidized” and most affected by flood reform

• Examples of subsidy programs in NFIP – Pre-FIRM construction (grandfathering) – recent flood zone map changes (PRP extension)

Note: Preferred Risk Policies are not subsidized – lower premium due to lower flood risk = risk-based premium


What’s Changing High Risk properties: Subsidies to be phased out  Non-primary residences (January 1, 2013)  Business properties (Oct. 1, 2013)  Severe repetitive loss properties and where


All categories except mapping: 25% p/yr. until fullrisk rate is achieved

Mapping: 20% p/yr. over 5 years

claims payments > fair market value (Oct. 1, 2013)

 Properties affected by map changes (2014)

New policies to be issued at full-risk rates (Oct. 1, 2013)  After the sale/purchase of a property  After a lapse in insurance coverage  After substantial damage/improvement  For properties uninsured as of the law’s enactment


NFIP Rating Examples: Premium comparisonsNon actuarial vs. actuarial The Impact of Loss of Subsidies

Building- $200,000 Contents- $80,000 (2012 Rates) $2,235/yr $2,235/yr $2,235/yr


$819/yr $5,623/yr $25,000+/yr



What Property Owners should do

owners Can Do: Understand flood risk and flood insurance • • • •

Flood is not covered under homeowners/commercial policies Buy building coverage and contents coverage separately 10 Questions to ask your flood insurance agent See for more info.

Absorb 2012 Flood Reforms enacted by Congress to: • Strengthen National Flood Insurance Program • Assign premiums based on each building’s flood risk—reduce subsidies • Subsidies will be reduced


What Property Owners should do

owners Can Do: 1. Review flood zone maps for your property • Refer to your municipality and building code officer • Add features to reduce loss and lower flood premiums • See to build higher, safer

2. As new flood maps are enacted • Know flood zone changes – for your property

• Call your insurance agent – Request a Flood insurance quote – Review flood policy coverage

3. Consider FEMA Mitigation programs 9

What agents can do • Inform policyholders --the phase in of increased premium. – Sample letter agent to policyholder—call agent to discuss changes – Watch the Expiring Policies tab-main page to prevent lapse • Sample letter to policyholders---lapsed policy = immediate full premium increase • Share the impact of loss of subsidies rate comparison

• Review policies—implement policy changes to allow continuation of coverage and affordability. – Reinstated policies, after lapse, get an immediate increase • (rather than a phase-in approach)

– Get signed waivers when modifying policies—protect E&O

• Share schedule—inform clients of planned flood map changes


Basics: NFIP 2012 Flood Reforms • Congress has passed reforms • NFIP will change in next 4 years • Premiums will become risk based • Affordability will be addressed with phase-in • Owners and agents can take action to understand.


NFIP October 1 Changes---Separate Changes from the B-W Flood Reforms Remember: • Today we were talking NFIP Flood Reform Law • NFIP annual changes will continue to occur that will affect premiums in addition to Flood Reform law. • Wright Flood will continue to provide information to agents and property owners. 12

Flood Mitigation Programs Available Mitigation Programs Availabl e 1. NFIP Community Rating System (CRS) Program • Premium discounts up to 45% 2. Increased Cost of Compliance (ICC) Program • Up to $30,000 for flood proofing, relocation, elevation, or

demolition after a flood claim. • Based on the community defining a property as substantially damaged by letter to property owners. 3. FEMA Hazard Mitigation and Severe Repetitive Loss

Grant Programs • Grants to municipalities to implement long-term hazard mitigation after a major disaster declaration. 13

Where to Find More Info and sources for this topic: • Biggert-Waters Flood Reform Legislation Summary • Residential Flood

• FEMA Protect your Property from Flooding • to understand more about flood maps o flood map update schedule by zip code

• Resource Library • Hazard Mitigation Grant Program (HMGP) • Pre-Disaster Mitigation (PDM) • Flood Mitigation Assistance (FMA) • Repetitive Flood Claims (RFC) • Severe Repetitive Loss (SRL)


Our Intentions: Wright Flood webinars are produced in an effort to communicate NFIP topics and/or underwriting rules as a convenience to Wright Flood agents and policyholders. We apologize if any inadvertent miscommunications result, and defer all disputed topics to the NFIP guidelines expressed in the NFIP Flood Manual as well as the Standard Flood Insurance Policy, FEMA Bulletins and official statements on the topic. See and Opinions offered represent the speaker only, are presented for purposes of discussion and do not represent positions taken by either Wright Flood, the NFIP or FEMA. If there are further questions, Wright Flood Marketing is always available to assist at 866-373-5663.


Thank you for your kind attention: Please visit our website for more information about Wright Flood: To find a Wright Flood agent or to represent Wright Flood, contact Flood Marketing at 866-373-5663 or at For permission to use this video, or for further information about flood insurance issues, please contact: Dolores Glass Communications Manager Wright Flood 866-373-5663 X 7651


Just the Basics of the 2012 Flood Insurance Reforms  

Wright Flood reviews the basic effects of the Flood Insurance Reform Act of 2012 for policyholders, propertyowners and their insurance agent...

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