An overview of the 2013 changes and modifications to the National Flood Insurance Program (NFIP) presented at the September 4, 2013 Lunch and Learn at the Charleston Trident Association of REALTORS (CTAR)
4. Flooding & Flood Risks
Anywhere it rains, it can flood.
Def: A flood is a general and temporary condition
where two or more acres of normally dry land or two or
more properties are partially or fully inundated by
water or mudflow…
EVERYONE is in a flood zone…it is just a matter of
how severe or high hazard of a zone one is in.
5. Flood Insurance 101
Coverage Limits: $250k for residential buildings,
$100k for contents. $500k for commercial buildings,
$500k for commercial contents.
Replacement Cost is ONLY for single-family
dwellings that are primary residences. Otherwise, you
will receive an Actual Cash Value (ACV) settlement.
B, C & X zones are low hazard flood zones and you
are not required to carry flood insurance if you have a
federally backed mortgage
A & V Zones are high hazard zones and you are
required to carry flood insurance if you have a
federally-backed mortgage
6. Why Have Flood Insurance?
To protect your assets from a loss
To meet requirements (mortgage holder)
Flood coverage is ALWAYS excluded from your home
insurance policy…always
Living in Coastal areas like the Lowcountry present
higher chances of a flood occurring
Would you not carry fire insurance? Auto liability
insurance?
7. Flood Insurance Stats and Facts
You have a 26% chance of a flood occurring over the course of a
30 year mortgage life
There is a 9% chance for a fire to occur
You are more likely to have a flood than your home burglarized
You are more likely to have a flood than your car stolen
90% of all Presidentially declared disasters involved flooding
Non-High Hazard Flood zones (X zones) represent 20% of all
flood insurance claims
The average residential flood claim was $30,000 from 2007-2011
The average standard A Zone flood insurance policy costs about
$600
Roughly 20% of all flood policies use subsidized rates yet cause
the most claims payouts
8. How Are Rates Determined?
Lots of factors determine flood insurance rates. These
include:
flood zone (X, A & V Zones)
amount of coverage requested (i.e. $250,000 for Building)
location of structure
age and design of structure
building occupancy (Residential, single family, multi family)
structure elevation if located in a Special Flood Hazard
Area (raised, slab, crawlspace…)
10. Biggert-Waters Reform Act of 2012
Over the years, costs and consequences of flooding
have continued to increase
Super Storm Sandy
Hurricane Katrina
Reconstruction Costs, Inflation…
For the NFIP to remain sustainable, the premium
structure must reflect the true risks and costs of
flooding
Proposed changes are designed to increase the fiscal
soundness of the National Flood Insurance Program
11. What are Subsidized Rates?
Reduced rates that are below the actuarially sound
rates that should be given to a specific property
Helps provide affordable insurance to protect from
flood related losses
Within the NFIP program, subsidized rates are most
commonly applied to structures built Pre-FIRM
Built prior to 1975 in many communities;
Charleston County 1971 (joined NFIP)
Dorchester County 1982
Berkeley County 1983
Built prior to the initial Flood Insurance Rate Map
(FIRM) which varies by community
12. Changes Coming Down the Pipeline
Premium Increases (avg. 10% across the board)
No extension of subsidy for New Pre-FIRM Policies or
Lapsed Pre-FIRM policies
Current Pre-FIRM policies will start seeing increases
annually till the full risk rate is achieved
What is the “full risk rate” you ask?
Elimination of No Waiting Period due to Lender
Requirement (except for NEW home loans)
13. Premium Increases
Overall average
increase of 10%
25% premium increases
for certain Pre-FIRM
policies
Non-primary residences
Severe Repetitive Loss
(SRL) properties
Business properties
V Zones
Post-FIRM = 11%
Pre-FIRM = 17%
A Zones
Post-FIRM 6%
Pre-FIRM AE zones = 16%
X Zones
Standard rated policies =
8%
Preferred Risk Policies
(PRP) = average of 1%
***NFIP has not given any specifics as to a ceiling on the level the
rate will rise to, so anticipate these rates to increase every year at
this rate
14. What Qualifies For A Direct
Move to Full-Risk Rates
After the sale/purchase of a property
Subsidized rates can no longer be assigned to the new owner
After a policy lapse
Will be costly if this happens…don’t let it happen
Sometimes happens in error when a client moves but house is
still for sale
New policy is issued
Policies for buildings that are uninsured as of 7/6/12 or later
Elevation Certificates
You also must present an elevation certificate to establish a
basis. EC’s cost anywhere from $350-$750
Mappus Insurance has negotiated a special rate with Atlantic
Surveying, Inc. Find coupon on our website.
15. 30 Day Waiting Period
Impacts policies where there is a loan on a structure in
a Special Flood Hazard Area (SFHA)
Zones beginning with A or V
Lender determines a flood insurance policy has not
been issued
Structure owner is required to purchase a flood
insurance policy
30 day waiting period will be imposed on these new
business policies
***This does not affect NEW loans
16. How Can You Help Prepare
Your Buyers and Sellers?
These new changes can dramatically affect the buying
power for a home purchase AND the purchase price
Get an Elevation Certificate. KNOW WHAT YOU &
CLIENTS ARE BUYING
Determines your Post-Firm rates
Possibly a buying/selling feature
Contact a competent insurance agency immediately to
work with your client
Always recommend flood insurance
17. Saving Money On Flood Insurance
Use of Higher Deductibles
Cover Building ONLY, No Contents
Consider Elevation (example on next page)
Apply breakaway walls or openings/ventilation (1 sq.
in. per 1 sq. ft. of floor)
Ensure all enclosure areas are for parking, storage and
building access ONLY. Cannot be furnished.
If renovations have been made, verify with the town/city
that all permits, requirements and laws were followed.
This can be very costly and an E&O claim against real
estate agents.
24. Other Things To Come
Grandfathering will be going away in the future.
These are post-firm homes that were built to compliance
at the time it was built but laws have changed since.
Their rates do not reflect current actuarial rates
Date is unknown but expected sometime in 2014. Rates
will be phased-in
Could get delayed……
Flood zones are currently being remapped and are set
to change in May 2015
Could get delayed……
25. In Closing
Get an Elevation Certificate
Go to MappusInsurance.com for coupon
Work with a competent insurance agent
Create a great customer experience
26. How To Contact Andrew
Andrew Muller, CIC, AAI, PRIS
843.714.9389 Cell
843.763.4200 Office
Andrew@MappusInsurance.com
www.MappusInsurance.com
Want to stay current on flood insurance and other home
insurance tips and strategies for your clients to help reduce
their risks and premium?
Email Andrew with the subject line “CTAR Flood Presentation”
and you will be entered to win a $50 Gift Card to Maverick
Restaurant Group
27. What the Association of REALTORS® is doing:
WORKING WITH U.S. HOUSE OF REPRESENTATIVES: With NAR’s support, Reps. Bill Cassidy
(R-LA) and Maxine Waters (D-CA) have successfully passed out of the House an amendment to the
Homeland Security Appropriations Bill to delay removal of “grandfathered” flood insurance rates
for one year. This will provide FEMA with additional time to complete the “Biggert-Waters”
affordability study and report to Congress on the impact of this and other rate reforms.
Congressman Mark Sanford voted for the amendment.
SENATE HAS YET TO ACT; DELAY IS NOT LAW
WORKING WITH U.S. SENATE: United States Senators Mary Landrieu (D-LA) and David Vitter
(R-LA) are working with NAR to include the delay in the Senate version of the Homeland Security
Appropriations Bill, and also expand it to include the other rate provisions effective October
1st which will start impacting home purchases later this year. Senate has not yet voted on
amendment.
AMENDMENT FOR DELAY ONLY FOR GRANDFATHERING
The law’s other phase-outs -- for older second homes and business properties and for homes
purchased after July 2012 – will continue to take effect on October 1, 2013. NAR is working on a
longer delay and expanding it to include the other subsidy phase-outs, in addition to grandfathered
properties.
28. MORE ON WHAT REALTOR® ASSOCIATION IS DOING FOR YOU:
FEMA is developing an affordability study in a report to Congress. NAR is working with FEMA to
provide the data we receive from our survey. NAR successfully advocated for the study’s inclusion in
the five year bill.
CITIES can lower their flood insurance premiums for their entire jurisdiction by sometimes just as
simple as filling out paperwork through the Community Rating System (CRS). CTAR will be
working with cities over the next year to ensure they’re doing all they can to improve their
community rating.
CONGRESSIONAL STAFF SYMPOSIUM: NAR, in cooperation with the American Bankers
Association and the National Association of Home Builders, held a flood insurance forum for
Members of Congress and congressional staff. The purpose of the forum is to educate Congress on
the coming changes required under the Biggert-Waters legislation and discuss legislative and
regulatory options currently under discussion. COMPLETED
U.S. SENATE BANKING COMMITTEE: Conducted a hearing on the affordability of the NFIP rate
provisions. COMPLETED