Last year a new Flood Insurance reform act the ‘Biggert-Waters Flood Insurance Reform Act 2012’ (BW-12) was passed by US congress making changes to the US National Flood Insurance Program. This calls on the Federal Emergency Management Agency (FEMA) to implement a number of changes to the NFIP
One of the Key provisions of the BW-12 legislation is that the NFIP to raise insurance rates based on the true flood risk in each State. The FEMA has already begun to reduce the subsidized rates for some properties. Other changes will be implemented between now and 2017. The main impact of these changes will mean that many people in high risk flood areas will face large increases in their flood insurance premiums.
Biggert-Waters Flood Insurance Reform Act of 2012 (BW-12)
Subsidies phased out for pre-FIRM, non-primary residences
- Subsidies phased out for pre-FIRM business and severe/repetitive-loss properties
- Effective October 1, 2013, subsidies will phase out for non-residential properties, Ssevere Rrepetitive L-loss properties of 1−4 residences, and properties that have incurred flood-related damages with claims payments exceeding the fair market value.
Subsidies phased out for pre-FIRM business and severe repetitive-loss properties
- Effective October 1, 2013, subsidies will phase out for non-residential properties, severe repetitive-loss properties of 1−4 residences, and properties that have incurred flood-related damages with claims payments exceeding the fair market value.
- Premium rates will increase by 25 percent a year upon policy renewal until they reach full-risk rates.
New policies issued at full-risk rates
- Effective October 1, 2013, full-risk rates will apply after the sale/purchase of property that was previously eligible for subsidized rates.
- New policies will also be issued at full-risk rates after a lapse in coverage, after substantial/damage improvement, and for properties uninsured as of BW-12 enactment.
Policies renewed at full-risk rates
- Effective October 1, 2013, policies for pre-FIRM buildings purchased on or after BW-12 enactment will be renewed at full-risk rates.
- Effective October 1, 2013, lapsed policies reinstated on or after Oct. 4, 2012, will be renewed at full-risk rates.
Rate changes will take place when new Flood Insurance Rate Maps (FIRMs) are adopted
- Anticipated to go into effect in late 2014, BW-12 requires phasing out grandfathered rates for properties in high-risk flood zones and moving to full-risk rates when a community adopts a new FIRM.
Wildfire 30-Day Waiting Period Exception
- BW-12 authorized an exception to the 30-day waiting period for coverage of wildfire-related flood damage. The policyholder’s damage must be due to flooding on Federal land caused or exacerbated by post-wildfire conditions on that Federal land.
- The waiting period exception is determined at the time of loss, not at the time of policy application, as part of the claim adjustor’s assessment.
We will try to keep you updated on the US National Flood Insurance Program.