January 9, 2014

1
North Carolina 2014 Homeowners Filed Rate
Revision by Territory
Per $75,000 Amount of Insurance
Protection Class 1 -5

Ter...
North Carolina Rate Bureau 2014 Homeowners Insurance
Rate Filing
Impact on NCIUA (Beach Plan Policies)
Full Homeowners and...
KEY
Total Reports = 1687
RED—Tornadoes = 113
GREEN—Hail Reports = 347
BLUE—Wind Reports = 1226

www.nc-20.com

4
Rates for $75,000 of HO Coverage:
1993 2014(filed)
Charlotte
$ 351
436
Gaston, Mecklenburg, Union
350
436
Ashe, Buncombe, ...
Flood Insurance
The Impact of the Biggert-Waters
Flood Insurance Reform Act of 2012

July 27, 2012

www.nc-20.com

6
DHS – Department of Homeland Security
FEMA – Federal Emergency Management Agency
NFIP – National Flood Insurance Program

...
BFE – Base Flood Elevation
V-Zones: Coastal high-velocity zones
A-Zones: Non-velocity zones, which are
primarily riverine ...










“the most costly and prevalent natural disaster risk
in the United States…”
1968 – Post extreme flooding ev...










Flood insurance required on federally backed
mortgages.
22,000 communities in ALL states and territories
...
WYO Program created in 1983. Allows companies to
write and service the NFIP in their name without bearing
the risk.
 Nine...





Financially sound for over three decades.
Successful in enacting local floodplain
ordinances & compensating proper...
13
The Good News:
Reauthorizes the NFIP for 5 years!

The Not-So-Good News:
Four Major Reforms

 Amendments to coverage, rat...









Rates are based on BFE and flood zone.
BW-12 will make the NFIP more financially stable
by raising rates to ...
Subsidized (discounted rates) removed from
pre-FIRM non-primary residences.
Rates will increase 25% a year until
actuarial...







Average 10% overall rate increase.
◦ V-zones: post-FIRM 11%; pre-FIRM 17%
◦ AE-zones: post-FIRM 6%; pre-FIRM 16...
Rates to increase 25% a year for other subsidized
discounted:
 Commercial properties.
 Severe repetitive loss properties...
Severe Repetitive Loss Properties (RLPs)
 Disproportionate large share of all claims.
 Approximately 1% of all NFIP prop...


Premium rates for other properties, including
non-subsidized discounted properties, will
increase as new or revised flo...








Increases the limit for annual rate increases
from 10% to 20% per year.
Allows for premium payments – either ...




Revised flood maps are due from NFIP in
2014. NC Floodplain Mapping Program
estimates Dare’s preliminary maps will b...




Establishes a Technical Mapping Advisory Council
that would advise FEMA on improving accuracy;
on standards that sho...









Be proactive and contact your insurance agent.
Ask how the changes are going to affect your
policy. Check y...







Second Home Debate – MOOT POINT!

◦ Second Home Pre-FIRM policies only make up about 5% of
total NFIP policyho...
Regardless of the size of the structure, the NFIP residential
structure policy limit is $250,000.
26
Pre-FIRM oceanfront Motel in Kill
Devil Hills. Owner will start seeing
a 25% increase in rate a year until
the actuarial r...
The Senate will likely vote next week on
S. 1846 - Flood Insurance Affordability Act
This bill would delay the loss of gra...
Willo Kelly

President, NC 20
www.nc-20.com
Government Affairs
Outer Banks Home Builders Association
Outer Banks Associati...
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North Carolina Homeowners Insurance Update and Changes to the National Flood Insurance Program

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Willo Kelly's presentation from 1/9/14 in Kill Devil Hills on the NC Rate Bureau's proposed rate revisions for 2014, just months after new homeowners insurance rates increased in July 2013. Just six months after the insurance rate hikes, the Rate Bureau is seeking another 25 percent statewide (North Carolina) and more than 35 percent along the Outer Banks and the North Carolin coast. These are the facts that the Department of Insurance will consider when they examine the Rate Bureau's proposal to see if the rate increases are warranted. As you will see, charging significantly higher rates in coastal NC counties represents an unfair burden.

The cost of homeowners insurance affects housing affordability, financing, re-financing and economic development. There has not been a hearing on a Homeowners Insurance Rate Filing since 1993. The NC Department of Insurance is accepting written public comments on the HO Rate Filing through January 31st by email at 2014homeowners@ncdoi.gov. A public comment session will be held on Friday, January 24th from 9:30am to 4pm in the Jim Long Hearing Room of the Dobbs Building, 430 N. Salisbury St. in Raleigh.

The US Senate is expected to vote soon on the Homeowner Flood Insurance Affordability Act, S. 1846 that was introduced by NJ Senator Menendez in December. S. 1846 would delay certain premium increases put forth in the Biggert-Waters Act for four years until FEMA can complete its Affordability Study and Congress can consider the recommendations of the study. This is common sense legislation; Congress and FEMA should understand the ramifications of the Biggert-Waters Act before implementing it. If this legislation is not implemented, homeowners and business owners across America will see dramatic, unaffordable flood insurance premium increases when they lose "grandfathering" under new maps.

PLEASE CALL SENATOR RICHARD BURR AND SENATOR KAY HAGAN AND URGE THEM TO VOTE YES on the motion to proceed to S. 1846, and YES on the bill and final passage. Senator Hagan has been supportive of the delay; Senator Burr has maintained his support for the Biggert-Waters Flood Insurance Reform Act of 2012 and has not been receptive to making changes to the law.

Contact info:
Senator Richard Burr: (202) 224-3154
http://www.burr.senate.gov/public/index.cfm?FuseAction=Contact.ContactForm

Senator Kay Hagan: (202) 224-6342
http://www.hagan.senate.gov/contact/

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North Carolina Homeowners Insurance Update and Changes to the National Flood Insurance Program

  1. 1. January 9, 2014 1
  2. 2. North Carolina 2014 Homeowners Filed Rate Revision by Territory Per $75,000 Amount of Insurance Protection Class 1 -5 Territory 7 8 48 49 Territory Definition Currituck, Dare & Hyde Brunswick, Carteret, New Hanover, Onslow & Pender Currituck, Dare, Hyde & Pamlico Beaufort, Camden, Chowan, Craven, Jones, Pasquotank, Perquimans, Tyrrell & Washington CURRENT RATE % FILED RATE FILED $ DIFFERENCE $1,613 35.0 $2,178 $565 $1,823 35.0 $2,461 $638 $1,021 9.8 $1,121 $100 $871 7.8 $939 $68 52A Brunswick, Carteret, New Hanover, Onslow & Pender $1,140 35.0 $1,539 $399 52B Brunswick, Carteret, New Hanover, Onslow & Pender $1,140 -2.7 $1,109 $-31 www.nc-20.com 2
  3. 3. North Carolina Rate Bureau 2014 Homeowners Insurance Rate Filing Impact on NCIUA (Beach Plan Policies) Full Homeowners and HO Wind Only Policies Territory Territory Definition Currituck, Dare & 7 Hyde Brunswick, Carteret, 8 New Hanover, Onslow & Pender 48 49 52A 52B Currituck, Dare, Hyde & Pamlico Beaufort, Camden, Chowan, Craven, Jones, Pasquotank, Perquimans, Tyrrell & Washington Brunswick, Carteret, New Hanover, Onslow & Pender Brunswick, Carteret, New Hanover, Onslow & Pender Full Peril Full Peril (Wind Rate with Included) 1.15 HO Homeowners NCIUA Fire/Liability Policy Surcharge Portion of Filed Rate Factor Filed Rate Wind Rate with 1.05 NCIUA Wind Only Surcharge Filed Rate Factor $2,178 $2,504.70 $293 $1,885 $1,979.25 $2,461 $2,830.15 $287 $2,174 $2,282.70 $1,121 $1,289.15 $120 $1,001 $1,051.05 $939 $1,079.85 $280 $659 $691.95 $1,539 $1,769.85 $267 $1,272 $1,335.60 $1,109 $1,275.35 $293 $816 $856.80 Rates are based on $75,000 dwelling value coverage, HO-3 policy, frame construction. www.nc-20.com 3
  4. 4. KEY Total Reports = 1687 RED—Tornadoes = 113 GREEN—Hail Reports = 347 BLUE—Wind Reports = 1226 www.nc-20.com 4
  5. 5. Rates for $75,000 of HO Coverage: 1993 2014(filed) Charlotte $ 351 436 Gaston, Mecklenburg, Union 350 436 Ashe, Buncombe, Burke 312 431 Alamance, Guilford, Davidson 350 477 Currituck, Dare, Hyde (obx) 578 2,178 Currituck, Dare, Hyde mainland 417 1,121 www.nc-20.com 5
  6. 6. Flood Insurance The Impact of the Biggert-Waters Flood Insurance Reform Act of 2012 July 27, 2012 www.nc-20.com 6
  7. 7. DHS – Department of Homeland Security FEMA – Federal Emergency Management Agency NFIP – National Flood Insurance Program www.fema.gov; www.floodsmart.gov; www.ncfloodmaps.com FIRM – Flood Insurance Rate Maps www.Region2Coastal.com Pre-FIRM – prior to effective date of Flood Maps SFHA – Special Flood Hazard Area CRS - Community Rating System BW-12 –Biggert-Waters Act of 2012 WYO – Write Your Own Companies, 90 in US that write flood insurance through NFIP. *NMG – No More Grandfathering 7
  8. 8. BFE – Base Flood Elevation V-Zones: Coastal high-velocity zones A-Zones: Non-velocity zones, which are primarily riverine zones X-Zones: Zones outside the Special Flood Hazard Area. 8
  9. 9.      “the most costly and prevalent natural disaster risk in the United States…” 1968 – Post extreme flooding events, Congress authorized the NFIP to reduce property losses from flood peril and public spending to compensate disaster victims. Private insurance companies were not willing to write coverage for flood risk. National Flood Insurance Act of 1968 mandates that coverage be widely available and affordable. FEMA administers NFIP and sets rates based on 100-year floodplain of potential flood hazards. 52% of US population lives within 50 miles of a watershed area. (NOAA) 9
  10. 10.        Flood insurance required on federally backed mortgages. 22,000 communities in ALL states and territories participate in the NFIP 5.6 million policies $1.2 trillion in exposure (structure and contents). 2012 premiums: $3.5 billion NFIP not required to have statutory reserves. From 1978 thru 2012, the NFIP has collected $6 Billion more in premium than claims paid. 10
  11. 11. WYO Program created in 1983. Allows companies to write and service the NFIP in their name without bearing the risk.  Ninety private WYO companies write policies, and process, settle, pay and defend all claims.  More than 1/3 of NFIP premiums collected goes to WYO companies and agents.  NFIP pays WYOs 15.6% of premiums as Expense Allowance (advertising, policy writing, general expenses, etc.); a 15% Commission Allowance; an add’l 2% if WYO meets 5% net growth in policies; Post-flood event – NFIP pays claims adjustment expenses PLUS 3.3% of each claim settlement for processing expenses. (This was adjusted after Katrina to prevent windfall to companies) FEMA does not know how much paid to WYO companies covers expenses vs. how much is profit.  11
  12. 12.    Financially sound for over three decades. Successful in enacting local floodplain ordinances & compensating property owners for flood loss. 2005 – Hurricanes Katrina, Rita and Wilma $$$ ◦ Forced NFIP to borrow $21 Billion from US Treasury Program’s insolvency blamed on four major flaws:  Does not charge full risk-based premiums for all properties  Repetitive loss properties  Mapping – outdated  Residual risk properties – exempts properties behind flood-control structures (levees and dams). 12
  13. 13. 13
  14. 14. The Good News: Reauthorizes the NFIP for 5 years! The Not-So-Good News: Four Major Reforms  Amendments to coverage, rate and premium structures.  Requirement for repayment plan and reserve fund.  Updates to Mapping Program.  Amendments to eligible mitigation activities. 14
  15. 15.      Rates are based on BFE and flood zone. BW-12 will make the NFIP more financially stable by raising rates to reflect true actuarial flood risk. FEMA reports 78% of policyholders already pay actuarial premiums. True risk is debated. (CRS) “Charging rates that fully reflect flood risk arguably would discourage development in the most risky areas.” Consideration will now be given to historical loss data including catastrophic years and other factors such as coastal storm surge and climate change. 15
  16. 16. Subsidized (discounted rates) removed from pre-FIRM non-primary residences. Rates will increase 25% a year until actuarial rates achieved. If your non-primary residence (lived in less than 80% of the year) was built prior to approximately 1974 and has had no major repairs or renovations, then the policy premium is most-likely discounted. Only 20% of policyholders (approx. 1.1 million) pay subsidized rates AND only 5% are second home policyholders. 16
  17. 17.     Average 10% overall rate increase. ◦ V-zones: post-FIRM 11%; pre-FIRM 17% ◦ AE-zones: post-FIRM 6%; pre-FIRM 16% ◦ X-Zones: Standard rated policies 8%; Preferred risk policy (PRP) written under the PRP Eligibility Extension 19%; all other PRP, no change Reserve fund (mandates $12 billion) - assessment of 5% for all policies – will be included in overall rate increases. New Application Forms and Elevation Certificate requirements. No extension of subsidy discount to new or lapsed policies for pre-FIRM properties in SFHAs. ◦ Does not apply to rollovers, transfers, or rewrites. 17
  18. 18. Rates to increase 25% a year for other subsidized discounted:  Commercial properties.  Severe repetitive loss properties (more than 4 claims).  Properties that have incurred flood-related damages where claims payments exceed fair market value. Full risk rates will also apply to policies written for newly purchased property. ◦ Effective for renewals post 10/1/2013 of subsidized discounted properties if purchased after July 6, 2012. ◦ Does not apply to gifts, transfers of ownership, or assignments to estate or trust in which purchase did not take place. (LLCs) 18
  19. 19. Severe Repetitive Loss Properties (RLPs)  Disproportionate large share of all claims.  Approximately 1% of all NFIP properties historically account for over a third of claims paid.  90% of RLPs Pre-FIRM  NC RLPs – through 2011 ◦ ◦ ◦ ◦ $474.5 million in claims paid 24,136 claims on 8,664 properties Average payment per claim $19,658.17 Total average payment per property $54,709 19
  20. 20.  Premium rates for other properties, including non-subsidized discounted properties, will increase as new or revised flood insurance rate maps become effective. Full risk rates will be phased in for these properties. You will no longer be allowed to continue to pay to the zone and elevation in place at time of construction. Your primary residence could be affected! NO More Grandfathering! “Even if you build to minimum standards today, you will be subject to significant rate increases upon remapping if your flood risk changes in the future.” 20
  21. 21.      Increases the limit for annual rate increases from 10% to 20% per year. Allows for premium payments – either annually or in more frequent installments. Lenders will be required to escrow payments and will be in control of claim payments to ensure repairs are made. Increased deductibles: pre-FIRM up to $100,000 of coverage - $1,500, pre-FIRM over $100,000 - $2000 Post-Firm deductible: up to $100,000 $1,000, over $100,000 - $1,250 21
  22. 22.   Revised flood maps are due from NFIP in 2014. NC Floodplain Mapping Program estimates Dare’s preliminary maps will be released July 2014. There will be a new mapped zone – the “Coastal A Zone”. ◦ Behind the V zone and other areas that experience a limit of wave action 3 ft. to 1 ½ ft. ◦ Could affect all soundfront property owners. 22
  23. 23.   Establishes a Technical Mapping Advisory Council that would advise FEMA on improving accuracy; on standards that should be adopted for flood maps, data and map maintenance; and on funding needs and strategy which could include the purchase of reinsurance. TMAC to develop recommendations for future conditions, including impacts of sea level rise, to determine rates. “The reforms will help communities looking to adapt to climate change. “ 23
  24. 24.       Be proactive and contact your insurance agent. Ask how the changes are going to affect your policy. Check your dwelling value! Get a new elevation certificate to determine base flood elevation. This determines your rate. Higher deductibles might lower your premium “Consider Remodeling or Rebuilding” – build higher, add vents to foundation or use breakaway walls. Community-wide mitigation steps? Provide input and feedback! ncinsurancehelp@gmail.com 24
  25. 25.      Second Home Debate – MOOT POINT! ◦ Second Home Pre-FIRM policies only make up about 5% of total NFIP policyholders. ◦ Second Home policyholders do not have Replacement Cost Coverage – they only have ACV coverage. ◦ Taxpayers are NOT Subsidizing Flood Insurance for BIG Second Homes/Vacation Homes. The definition of NFIP SUBSIDY. The amount of additional premium revenue BW-12 would generate. The amount of interest NFIP policyholders have paid on the debt from Hurricane Katrina. The detrimental impact of BW-12 on middle class mortgage holders. ◦ Unable to pay exorbitant premium, unable to sell, foreclosure ◦ Lower market value, decreased local tax revenues 25
  26. 26. Regardless of the size of the structure, the NFIP residential structure policy limit is $250,000. 26
  27. 27. Pre-FIRM oceanfront Motel in Kill Devil Hills. Owner will start seeing a 25% increase in rate a year until the actuarial risk rate is achieved. Owner currently pays $5,600 a year for flood insurance. To find out what his ultimate premium would be once phased in, he asked his agent what a new owner would have to pay if he sold the property. The owner was told the premium would be approximately $55,000. www.nc-20.com 27
  28. 28. The Senate will likely vote next week on S. 1846 - Flood Insurance Affordability Act This bill would delay the loss of grandfathering and other burdensome provisions of BW-12 for 4 years. Call NC Senators and tell them to support this bill! SENATOR RICHARD BURR (202) 224-3154 SENATOR KAY HAGAN (202) 224-6342 28
  29. 29. Willo Kelly President, NC 20 www.nc-20.com Government Affairs Outer Banks Home Builders Association Outer Banks Association of Realtors ncinsurancehelp@gmail.com (252) 202-7927 29

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