Know Your Flood Insurance Changes

July 22, 2014

Staff Report for The Island Connection

On March 21, 2014, the President signed the Homeowners Flood Insurance Affordability Act of 2014. This law repeals and modifies certain provisions of the Biggert-Waters Flood Insurance Reform Act of 2012. FEMA is actively analyzing and prioritizing implementation of this new law. In accordance with the new law, FEMA will work to develop and finalize its guidance and rate tables within eight months.

Below is a summary of the insurance changes outlined in the law:

PREMIUM RATES FOR SUBSIDIZED POLICIES (Subsidized Policy = Pre-FIRM policy):

*New law requires gradual increases to properties receiving subsidized rates instead of the immediate increases to full-risk rate.

*FEMA is required to increase premiums for most subsidized properties by no less than 5 percent annually until the class premiumreaches its full-risk rate.

*Premiums can increase no more than 18 percent annually with the exceptions of the following:

• Businesses receiving subsidized rates

• Non-Primary Residences receiving subsidized rates

• SRL properties receiving subsidized rates

• Substantially damaged or improved buildings. These properties will continue to see the 25 percent annual increase

NEW SURCHARGE ON ALL POLICIES

• A new surcharge will be added to all policies to offset the subsidized

policies and achieve the financial sustainability goals of BW-12.

• A policy for a primary residence will include a $25 surcharge.

* All other policies will include a $250 surcharge. The fee will be included on all policies, including full-risk rated policies, until all Pre-FIRM subsidies are eliminated.

GRANDFATHERING:

• The new law repeals a provision of BW-12 that required FEMA, upon the effective date of a new or updated Flood Insurance Rate Map, to phase in premium increases over five years by 20 percent a year to reflect the current risk of flood to a property, effectively eliminating FEMA’s ability to grandfather properties into lower risk classes.

• Also for newly mapped in properties, the new law sets first year premiums at the same rate offered to properties located outside the Special Flood Hazard Area (preferred risk policy rates). With limited exceptions, flood insurance premiums cannot increase more than 18 percent annually.

REFUNDS:

Refunds Apply To:

• Policyholders in high-risk areas who were required to pay their full-risk rate after purchasing a new flood insurance policy on or after July 6, 2012.

Refunds May Apply To:

• Policyholders who renewed their policy after the Homeowner Flood Insurance Affordability Act was en- acted on March 21, 2014 and whose premium increased more than 18 percent .

Refunds Do Not Apply To:

• Policyholders paying the 25 percent annual rate increases, as required by Congress in BW- 12, for a Pre-FIRM subsidized nonprimary residence, business, Severe Repetitive Loss property, or building that was substantially damaged or improved.

• Policyholders whose full-risk premium is less than the Pre-FIRM subsidized premium, or who were not overcharged according to any retroactive revisions to the Pre-FIRM subsidized rates required by the new law.

• Policyholders who saw usual, annual rate increases in 2013 or 2014, or policyholders who paid the 5 percent fee, as required by BW-12, for the NFIP Reserve Fund, will only see a refund if their premium renewal was after March 21, 2014 and their total premium, including the reserve fund, exceeded 18 percent.

Information courtesy DNRSC Mitigation Minute:www.dnr.sc.gov/flood