Changes to Flood Insurance Rates Effective April 1

Several changes to the National Flood Insurance Program take effect on April 1, impacting a wide range of builders, developers, businesses, home owners and insurance agents operating in areas covered by the National Flood Insurance Program.

Federal Emergency Management Agency has indicated that the maximum individual rate increase for any individual policy is 18%, with a few exceptions. The guidance also states that average premiums – once certain fees are accounted for – will increase 9% for policies written or renewed on or after April 1. For most risk classes, the average annual premium rate increases are limited to 15%.

Many of the changes are a result of continued implementation of the Homeowner Flood Insurance Affordability Act of 2014 and the Biggert-Waters Flood Insurance Reform Act of 2012 (BW-12). Congress passed BW-12 and subsequently Homeowner Flood Insurance Affordability Act to reauthorize and reform the program.

In its summary, Federal Emergency Management Agency notes that changes will also affect mapping, mitigation efforts and program outreach. Each property will see distinct impacts because characteristics such as flood zone, year built (which affects whether it is depicted on the Flood Insurance Rate Map) and property type still play a role in individual premiums.

Other changes include new rating methodology for properties newly mapped into a Special Flood Hazard Area and the elimination of subsidies for certain pre-FIRM policies that lapse and are reinstated past 90 days. In instances where a policyholder wants to return to the National Flood Insurance Program program after the lapse, he or she must obtain an elevation certificate and use the full-risk rate.

Furthermore, Homeowner Flood Insurance Affordability Act Section 28 requires Federal Emergency Management Agency to clearly communicate full flood risk determinations to individual property owners, regardless of whether their premium rates are full-risk rates. To achieve this, Federal Emergency Management Agency will require National Flood Insurance Program insurers to report current flood zone and rate map information for all new business polices effective on or after April 1 and for all renewals effective on or after Oct. 1.

The $25 surcharge for single-family primary residences and the $250 surcharge for all other policies, which went into effect April 1, 2015, remains unchanged.

This round of implementation activity occurs at the same time as regulators look ahead to the next round of program reauthorizations. Congress must pass National Flood Insurance Program reauthorization by Sept. 30, 2017.

In January, the National Association of Home Builders took part in an introductory roundtable and a hearing to discuss National Flood Insurance Program re-authorization. Congress plans to release draft legislation by the end of 2016.