Bill delays some flood insurance rate hikes

By Liz Segrist
Published Jan. 20, 2014

Spikes in flood insurance premiums for some homeowners will be delayed for around nine months.

Congress passed a $1.1 trillion omnibus spending bill late last month. The bill included a provision that will delay some flood insurance rate hikes from the Biggert-Waters Flood Insurance Reform Act of 2012.

If the bill receives approval from President Obama, the Federal Emergency Management Agency will not be able to enforce higher premiums  until the end of its fiscal year on Sept. 30 for those homeowners that have “grandfathered” subsidized rates but are now facing higher premiums due to remapping.

The provision does not delay all rate hikes caused by the new law, rather it temporarily delays the rate hikes for homeowners remapped into a higher flood zone, said Andrew Muller, an insurance adviser with Mappus Insurance Agency

The properties were built to code at the time but are now out of compliance with new flood maps, although not all areas have been remapped yet. Remapping is supposed to take place in 2015 for the Charleston area, Muller said.

Congress is still working to try to delay loss of subsidies for pre-firm properties, or older structures built before the community’s first flood map was issued, Muller said.

“Homeowners worried that new federal flood maps will send their flood insurance premiums skyrocketing would get some short-term relief under a provision tucked into a massive government-wide funding bill,” according to a Claims Journal story. “But other changes to the federal flood insurance program, including higher premiums on businesses, vacation homes and frequently flooded properties will remain in place, as well as a new rule blocking homeowners from passing insurance subsidies on to the people who buy their homes.”

Read more background here:


What can policyholders do?

  • Look at their current flood maps.
  • Obtain an elevation certificate, if impacted.
  • Talk with the local floodplain administrator to learn whether a preliminary flood insurance rate map is available.
  • Know their risk and start planning for mitigation actions.
  • Call their insurance agents for details on their policy.

Congress passed the Biggert-Waters Flood Insurance Reform Act of 2012 in July 2012 in an effort to pay down the National Flood Insurance Program’s debt, but opponents say the Federal Emergency Management Agency needs to study the plan’s affordability.

The law, enacted Oct. 1, removes subsidies that kept federal flood insurance premiums artificially low for policyholders who own homes that were built before the federal program went into effect in certain communities.

In Charleston County, homes built before 1971 received subsidies. In Berkeley and Dorchester counties, homes built pre-1983 and pre-1982, respectively, received subsidies.

FEMA says roughly 20% of property owners with federal flood insurance received subsidies nationwide. Under the new law, those subsidies will go away, and premiums will increase significantly.

Statewide, roughly 203,000 properties are affected, according to FEMA. In the Charleston market, that includes beachfront homes and inland homes near rivers and creeks.

All homeowners with flood insurance are being affected, more so those in older homes. Those that have had a flood policy in effect prior to July 6, 2012 will see their rates increase by an average of 10% annually, starting at their renewal date.

Incremental increases will continue until rates reach levels that would reflect the actual risk from flooding. Rates are determined by the home’s elevation in relation to the base flood elevation level for that property, Muller said.

Year of construction and type of construction also influences rates. To determine rates, homeowners need an elevation certificate completed.

The new rates will be instituted immediately and in full, though, if the property is sold; if coverage lapses; if substantial damage or improvement occurs; or if a property was uninsured when the new law was enacted, according to FEMA.

Sens. Robert Mendendez, D-N.J.; Johnny Isakson, R-Ga.; and Mary Landrieu, D-La., and Reps. Michael Grimm, R-N.Y., and Maxine Waters, D-Calif., introduced the Homeowner Flood Insurance Affordability Act.

The S.C. Association of Realtors and the Charleston Trident Association of Realtors have been advocating for Congress to delay implementation.

“The bill takes the crucial first step toward delaying further implementation of some rate increases in the Biggert-Waters Flood Insurance Reform Act of 2012,” National Association of Realtors President Gary Thomas said in a statement.

“This will allow the Federal Emergency Management Agency to complete an affordability study that was mandated by BW-12; propose targeted regulations to address any affordability issues found in the study; and give Congress adequate time to review those regulations.”

Reach Liz Segrist at 843-849-3119 or @lizsegrist on Twitter.

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