NFIP Flood Insurance Changes – Effective April 1, 2016

Flood Insurance ProgramAs a realtor or property owners, here’s what you need to know about some of the significant changes taking effect April 1, 2016. (click the link to a Flood Insurance newsletter with more details).

Reminder:  You should contact your favorite flood insurance agent for more details and clarifications for specific properties.  This is general information presented as a service to keep you informed as a real estate professional.

Updated Premium Rates

  • For most policyholders, the premium increase cap will be set at 18%. However, there are additional increases to non-premium fees and surcharges that could result in a net change in the amount paid by a policyholder that exceeds 18%.
  • For non-primary residential properties (i.e. second homes and investment properties), premiums will be increased 25% annually until they reach full-risk rates, as required by Section 100205 of the Biggert-Waters Flood Insurance Reform Act of 2012.
  • Other properties seeing 25% annual premium increases are Severe Repetitive Loss (SRL) properties, substantially damaged/substantially improved properties, and – effective April 1st – business properties.

New Rating Methodology for Preferred Risk Properties and the Newly Mapped Procedure

The rating methodology for all Preferred Risk Policies (PRPs) and Newly Mapped policies is being revised effective April 1, 2016. This new methodology is being introduced in order to comply with Section 6 of Homeowner Flood Insurance Affordability Act (HFIAA) regarding properties newly mapped into the SFHA. This new methodology is being introduced in order to comply with Section 6 of Homeowner Flood Insurance Affordability Act (HFIAA) regarding properties newly mapped into the SFHA.

Elimination of Subsidies for Certain Lapsed Policies

FEMA will prohibit the use of Pre-FIRM subsidized rates for policies reinstating coverage for Pre-FIRM buildings that were previously insured by the NFIP where the NFIP coverage is reinstated by means of a payment received more than 90 days after expiration or cancellation of the policy.  This same prohibition will apply to policies rated under the Newly Mapped procedure in the event of a lapse.

Reduction of Coverage Clarified

A FEMA policy issuance published in 2005 that changed the reformation and reduction clause in the NFIP’s Standard Flood Insurance Policy will be revoked on April 1. The policy issuance had previously eliminated the backdating of reformation of coverage and called for only prospective corrections – meaning they would only be adjusted going forward.  But now prospective reformation will only apply to misratings for incorrect flood zones or base flood elevations.  Going forward, if there is loss in the current term and the discovery of the misrating is 60 days or less prior to the renewal, the correction will simply be made as of the upcoming renewal date.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s