NFIP Increases Scaled Back

In July 2012, the Biggert-Waters Act was signed into law, and implementation began in January 2013. The legislation sought to make the National Flood Insurance Program (NFIP) solvent by aligning flood insurance premiums with actual risk. The Act eliminated many subsidies, and some home and business owners saw their rates skyrocket beyond what they could afford. Premium increases were to be phased in at a rate of 25 percent per year until the actuarial rates were achieved.

“The NFIP is about $20 billion in debt,” explained Melissa Trosclair Daigle, a research associate and resiliency specialist with the Louisiana Sea Grant Law and Policy Program. “A lot of NFIP is still in flux. It’s changing fast.”

The changes continued when the Homeowner Flood Insurance Affordability Act of 2014 was signed into law in March to reform Biggert-Waters. It went into effect in June and grandfathers in some properties, mandates refunds for certain full-risk rated policyholders and repeals parts of Biggert-Waters as a way to lower premiums. The Federal Emergency Management Agency (FEMA) is now required to improve coordination with communities before and during floodplain mapping, to designate a flood insurance advocate to promote the fair treatment of NFIP policy holders, and to consider the effects of non-structural flood control features (such as wetland restoration) when mapping special flood hazard areas. FEMA also has greater responsibility to report to members of Congress for each state and congressional district affected by preliminary maps.

Despite the amendments to the law, non-primary residences, businesses and properties that have suffered severe repetitive losses are still subject to the original increases. The new law also imposes a mandatory annual surcharge beginning in 2015 of $25 on policies for primary residences and $250 on all other policies to help close the financial gap in the program. The surcharges are not considered premiums and are not subject to new premium increase caps.

In response, members of the LSG Law and Policy Program are talking with local governments about the changes and are working to create a Web page with FEMA-approved information.

“Participating in the NFIP’s Community Rating System (CRS) is the best way to respond,” said Daigle. The CRS is a voluntary incentive program through FEMA that reduces flood insurance premiums for parishes and municipalities that implement floodplain management practices that exceed federal minimum requirements. Communities earn points for completion of 19 creditable activities in four categories: public information, mapping and regulations, flood damage reduction, and warning and response.

Louisiana Sea Grant and the Mississippi-Alabama Sea Grant Consortium recently received a two-year grant from the EPA to work on a pilot program with user groups to maximize the CRS points earned in their respective states. User groups generally meet monthly with guest speakers to discuss ways to improve the community’s flood rating. Daigle and her counterpart in Mississippi-Alabama, Niki Pace, intend to focus on community planning and public education campaigns.

FEMA strongly encourages policy holders to maintain their flood insurance, noting that lapses in coverage leave properties vulnerable to uncompensated losses and may cause policyholders to lose important discounts.

“Currently, people are either elevating their properties or relocating if they can’t afford to elevate. On the ground, this is what the reality is,” Daigle said.

On the Web:

Flood Insurance Reform Act – http://www.fema.gov/flood-insurance-reform-law

Community Rating System – www.crsresources.org