Flood Insurance Changes

Link to FEMA’s Flood Insurance Reform webpage that discusses the history of the formation of the NFIP, the current state of nation-wide mapping, legislation and its impacts on the NFIP, rate changes, how we work with our partners, like Write Your Own private insurance companies, and more.

Background:  In 1968, Congress created the NFIP to provide a means for property owners to protect themselves financially from flood events.  The NFIP offers flood insurance to homeowners, renters and business owners if their community participates in the NFIP.  Participating communities agree to adopt and enforce floodplain management ordinances that meet or exceed FEMA requirements.

Since the NFIP’s inception, additional legislation has been enacted to strengthen the program, ensure its fiscal soundness and inform its mapping and insurance rate-setting through expert consultation, reports and studies.

Today the program is focused on implementing recent legislation by adjusting premium increases, issuing new rates and map updates, supporting mitigation and ensuring special advocacy to connect policyholders with the information they need to better understand the program.


National Flood Insurance Program Rate Changes Effective April 1, 2019

October 1, 2018

As announced on Oct. 1, 2018, key changes being made to the NFIP on April 1, 2019, include updated Insurance Policy Premium Increases conforming to the premium rate caps established by the Biggert-Waters Flood Insurance Reform Act of 2012 (BW-12) and the Homeowner Flood Insurance Affordability Act of 2014 (HFIAA).

  • Premiums will increase upon renewal an average of 8.2 percent beginning April 1, 2019.  These amounts do not include the HFIAA Surcharge, or the Federal Policy Fee (FPF).  It is important to note that nearly 80 percent of NFIP policyholders already pay a full-risk rate.
  • Annual premium increases of 5 percent for Preferred Risk Policies (PRPs) and 15 percent for Newly Mapped procedure policies will become effective Jan. 1, 2020.

Effective April 1, 2019, FEMA will introduce a Severe Repetitive Loss (SRL) Premium for all policies covering properties with an SRL designation.  The SRL Premium will be 5 percent for all SRL policies.

Link to the April 1, 2019, and January 1, 2020, Program Changes.


FEMA Informs NFIP Participating Communities of Program Modifications

February 2019

The National Environmental Policy Act of 1969 directs federal agencies to thoroughly assess the environmental consequences of major federal actions that could significantly affect the environment.  In May 2018, FEMA published a Record of Decision in the Federal Register  to announce its intent to implement the Preferred Alternative program modifications to the National Flood Insurance Program (NFIP). FEMA undertook the preparation of a Nationwide Programmatic Environmental Impact Statement (NPEIS) and completed the Record of Decision because changes to the NFIP are considered to be a major federal action. As a first step toward implementation, FEMA is sending an awareness letter to more than 22,000 communities that participate in the NFIP.

The program modifications contained in the Preferred Alternative to the NFIP NPEIS are needed to implement the legislative requirements of the Biggert-Waters Flood Insurance Reform Act of 2012, the Homeowner Flood Insurance Affordability Act of 2014, and to demonstrate compliance with the Endangered Species Act (ESA).  The three primary NFIP component areas are mapping, insurance, and floodplain management.

At this time, NFIP participating communities are not required to implement the program modifications contained in the Record of Decision’s Preferred Alternative.  FEMA is continuing its outreach to ensure communities are aware of the forthcoming changes.  FEMA will continue to develop the necessary policies and processes to implement the program modifications listed in the final NPEIS, and will coordinate with the U.S. Fish and Wildlife Service and the National Marine Fisheries Service.

The final NPEIS, Record of Decision and a copy of the Community Awareness Letter are available on FEMA.gov at https://www.fema.gov/programmatic-environmental-impact-statement.


Congressional Research Service Takes a Deep Look into Private Flood Insurance & the NFIP

July 2018

The report describes the current role of private insurers in U.S. flood insurance, and discusses barriers to expanding private sector involvement.  The report considers potential effects of increased private sector involvement in the U.S. flood market, both for the NFIP and for consumers.  Finally, the report outlines the pro-visions relevant to private flood insurance in the House and Senate NFIP reauthorization bills.  Read the full report here.


FEMA Releases Affordability Framework for the National Flood Insurance Program

April 17, 2018

FEMA released an Affordability Framework for the NFIP, which for the first time provides data-driven analysis of the cost burden borne by flood insurance policyholders and potential policyholders, identifies the populations most burdened by the cost of flood insurance, and provides options for policymakers to consider to help close the flood insurance gap across the nation by reducing the cost burden of flood insurance.

Through the Biggert-Waters Flood Insurance Reform Act of 2012 and the Homeowner Flood Insurance Affordability Act of 2014, Congress directed FEMA to examine options to aid individuals so they could afford risk-based premiums under the National Flood Insurance Program (NFIP), and to develop a framework to help policymakers consider how to provide targeted assistance to policyholders and potential policyholders.

In the Affordability Framework, FEMA proposes several options based on income and offers descriptive models of the cost of each option.  The following tasks were considered:

  • Understand the affordability of the current NFIP portfolio as a baseline to better understand the impact of changes going forward.
  • Begin the process of building the affordability framework.
  • Complete the process of building an affordability framework.

As part of FEMA’s 2018-2022 Strategic Plan, FEMA is working to close the insurance gap with the assistance of both public and private insurers.  As the largest provider of flood insurance in the United States, the NFIP is working to double the number of properties covered by flood insurance from the current 4 million to 8 million by 2023.

The Affordability Framework is available online at www.FEMA.gov/national-flood-insurance-program-publications.


Office of the Flood Insurance Advocate Releases 2018 Annual Report

July 2019

The Office of the Flood Insurance Advocate (OFIA) recently announced the release of the 2018 Annual Report. The report is intended to increase transparency, and to support the ongoing improvements to the National Flood Insurance Program (NFIP) with the goal of reducing its complexity.

In 2018, the OFIA identified four primary policyholder and property owner frustrations, which included recommendations that present opportunities for reducing the complexity of FEMA:

  • Confusion Regarding Premium Increases
  • Confusion Regarding Condominium Coverage
  • Misunderstanding Claim Impacts When Assuming a Non-Primary Residence
  • Lack of Refunds for Prior Policy Terms After a Letter of Map Amendment is Issued

The mission of the OFIA is to advocate for the fair treatment of policyholders and property owners by providing education and guidance on all aspects of the NFIP, identifying trends affecting the public, and making recommendations for program improvements to FEMA leadership.


NFIP Flood Insurance Changes: October 2017, April 2018 and …January 2019

After the flurry of changes to the federal flood insurance program following the reform legislations of 2012 and 2014, FEMA has settled down on making changes in October, April and January.  In the recent October 2017 update, we saw minimal changes (HFIAA Surcharge can now be pro-rata refunded if a policy is canceled.  And except for mainly the Preferred Risk Policies, the Federal Policy Fee for contents-only policies was reduced to $25).  The latest version of the NFIP Manual includes these changes.

The recently announced changes for April 2018 and January 2019 (for the Preferred Risk Policy and Newly Mapped Procedure annual changes) are pretty much in line with last year.

April 1, 2018 highlights:  Rate Increases:

  • Average premium increase is 6.9%
  • Besides the pre-FIRM subsidized premiums that are congressionally-mandated to increase 25% (e.g., non-primary residences, non-residential businesses), pre-FIRM premiums increase only 5%
  • Post-FIRM A Zones will see minimal to no increases; e.g., AE: 1%; AO or AH: 0%; Unnumbered Zone A: 2%
  • Standard X Zone: 1%

Primary Residence Determination: FEMA recognizes a policyholder can have more than one primary residence, as each spouse could live more than 50% of the year at a separate residence.

Phase 2 of Re-underwriting the NFIP policy base: This is delayed/extended.  In response to HFIAA, FEMA needs to send out letters to all policyholders to clearly communicate their risk.  To do so, FEMA asked insurance companies and NFIP-Direct to underwrite basically all renewal policies, but post-FIRM policies starting October 2016.  FEMA would then send a letter to each of those policyholders after the policy renewed.  The Post-FIRM phase was to start this October, but it is now delayed due to the recent hurricanes and will start when April 2018 renewal notices begin going out (though some companies have already started it).

January 1, 2019 changes:

  • Preferred Risk Policy (and eligible A99 and AR) premiums will increase 6%
  • The Newly Mapped policy multiplier continues to be 15%

NOTE: With all of that published, FEMA just released an additional Bulletin that increases the ICC premium starting April 1, 2018.  In some cases, the annual increase is $1, but in others, like pre-FIRM Zone A, we are seeing $5 and $10 increases.  FEMA did not revise the overall rate increase percentages mentioned above so we don’t know the relative percentage impact.


FEMA Communicates Flood Risk Information to Policyholders

January 11, 2017

In January 2017, FEMA began the next phase of implementation of Section 28, Clear Communication of Risk, of the Homeowner Flood Insurance Affordability Act of 2014 (HFIAA), which requires the Agency to clearly communicate full flood risk determinations to individual property owners.  To meet this requirement, the NFIP reviewed the flood risk and underwriting information for every flood insurance policy, and is writing to all NFIP policyholders to communicate how their flood risk impacts their premium rate.

Policyholders will begin receiving one of seven letters, depending upon their policy, in 2017.  Policyholders who renewed policies in October 2016 through December 2016 will also receive their first mailing at this time.  The letter will continue to be mailed at each subsequent renewal.  With flood risk information varying from one policy to the next, the letter encourages each policyholder to contact their insurance agent to discuss their policy and options.  It may also be helpful to visit FEMA.gov/cost-of-flood.

In addition to Section 28, HFIAA requires gradual insurance rate increases to properties that currently receive artificially low (or subsidized) rates, rather than immediate increases to reflect the property’s full flood risk.  HFIAA requires increases to premiums for most subsidized properties by no less than 5 to 15 percent annually, but no more than 18 percent for an individual policyholder – with limited exceptions –until the premium reaches its full-risk insurance rate.  Approximately 80 percent of NFIP policyholders currently pay full-risk rates and are minimally impacted by these increases.

Information for policyholders and insurance agents can be found at FEMA.gov/cost-of-flood.  This important information is to help National Flood Insurance Program policyholders and agents understand how a building’s flood risk impacts the cost of flood insurance.


WYO Program Bulletins

FEMA periodically issues WYO Program Bulletins related to recent legislative changes and clarifications to the NFIP Flood Insurance Manual.  The bulletins are posted at http://www.nfipiservice.com/nfip_docs.html.


KAMM mailing address: KAMM, PO Box 1016, Frankfort, KY 40602-1016.

Have questions, contact us at kentuckymitigation@gmail.com.  Don’t forget to join the KAMM group on LinkedIn.