From the headlines to your bottom line, this edition of Flood Risk News & Notes includes another extension of the National Flood Insurance Program (NFIP); an increase in flood insurance premium rates; flood map changes in more than 70 communities around the country; and a reminder about elevation certificates. Below you will find a summary of headlines and reasons why they matter to residential and commercial property owners, especially those subject to the NFIP’s mandatory flood insurance purchase requirement.

Another Reauthorization Reprieve for the National Flood Insurance Program

NFIP would extend to July 31 as part of spending bill – Business Insurance

The National Flood Insurance Program would be extended to July 31, as part of an omnibus spending bill that would fund the federal government through the end of the fiscal year.

Once again, the nation’s federal flood program, initially set to expire September 30, 2017, has been granted an extension until July 31, 2018, as part of Congress’ $1.3 trillion spending bill that funds the government through the end of September.

Bryan Stole from The Advocate (Baton Rouge, LA) provides a salient takeaway:

… lawmakers on Capitol Hill now face a July deadline to either overhaul the NFIP, extend it again — or let it lapse in the midst of hurricane season.

That could put added pressure on Congress to hammer out a deal on how to shore up the debt-laden federally run insurance program. A compromise on the program has so far been elusive.

Negotiations between budget hardliners and coastal lawmakers have yielded little in the way of progress over the past few months and legislation to overhaul the program has languished in the U.S. Senate.

Budget hawks have pushed changes to the NFIP that would dramatically raise rates on many high-risk homeowners who currently pay below-market premiums and shrink the program by booting some properties that have repeatedly flooded.

Read the full article here.

The legislative lag in NFIP reform underscores the vital importance of accuracy in flood risk.  The NFIP has never been able to evaluate individual characteristics to determine a property’s true exposure to flooding, but you can. Knowing a property’s true exposure may reveal that a structure (home or building) sits at an adequately high elevation and has been erroneously designated as high-risk, leading to unwarranted flood insurance expenditures and decreased real estate value. Conversely, knowing a property’s true exposure may reveal that a structure is susceptible to flooding, requires mitigation activities and increased insurance coverage.

Flood Insurance Rates Increase April 1

Flood Insurance Premiums Are About to Go Up

Many homeowners and buyers in flood-prone areas will see higher flood insurance premiums starting April 1. The premium hikes, which are required by law, will be as little as 2 percent for some properties and as high as 24 percent for others. On average, the increase will be about 8 percent.

Take a good look at your flood insurance renewal or take heed in the event you’ve recently requested a quote for coverage. As of April 1, 2018, the cost of flood insurance in a flood zone, especially in a high-risk flood zone, will increase. Most residential and commercial flood insurance policies will see an increase between 5 and 25 percent, respectively, over the 2017 cost of coverage – even if there’s never been a claim filed.

Many property owners should be troubled by the fact that nearly a quarter of flood losses and NFIP claim payments occur in non-SFHAs (Special Flood Hazard Areas). In other words, not only are most policyholders subsidizing properties that are truly at risk of flooding, but also carrying the burden of a federal flood insurance program on the brink of insolvency.  Now would be a good time to verify the accuracy of your flood insurance requirement to protect the value of your real estate holding and to manage the bottom line.

Flood Map Updates

Over the course of the last two months, the Federal Emergency Management Agency (FEMA) released revised flood insurance rate maps for 78 communities around the country. Updated maps can place homes and buildings in an SFHA, also known as a high-risk flood zone, or in a low-to-moderate flood zone, where flood insurance is not required. Flood maps provide broad‐brush strokes.  They depict geographical areas as opposed to individual structures and do not take into consideration structures built above the community’s base flood elevation to mitigate flooding.  A flood map determines the price property owners pay for flood coverage, and influences real estate values.

Below you will find FEMA links to flood map update lists, categorized by effective dates.  Click on your respective state to learn if your community is on a list. While these lists only include NFIP participating communities, you can check any property location here.

February 2, 2018 – States affected include Louisiana

February 16, 2018 – States affected include Texas and Iowa

March 6, 2018 – States affected include Mississippi, Arizona, and California

March 20, 2018 – States affected include Iowa and Louisiana

Is your community on the list?  Now is the time to be proactive.

If you own a commercial or residential structure and carry a mortgage in a community that participates in FEMA’s National Flood Insurance Program, your lender may require you to purchase flood insurance if the property is in a high-risk flood zone. Failure to do so within a year of the effective map date may result in forced placed insurance by the lender.  Flood insurance costs range from a few hundred dollars in low-risk zones to several thousands of dollars in high-risk zones.

If newly placed into a high-risk flood zone, the first step is to conduct a flood risk evaluation, which determines the true level of risk of the individual structure. This comprehensive review may indicate that the designation is wrong and qualifies for reclassification into a low-to-moderate flood zone. On the other hand, it may confirm that the structure is truly at high-risk of flooding, in which case, a property owner should initiate mitigation measures and discuss increased coverage with an insurance agent.  If newly removed (reclassified) from a high-risk flood zone, explore your options, which may include less expensive coverage, appropriate flood coverage through a master policy at no cost (commercial properties only), or dropping coverage altogether.

Elevation Matters

As recently reported in the publication Ocean City Today, here are a few reasons why elevation matters:

The rates for insurance are based on flood maps and property elevations. Consequently, residents should check their properties’ elevation certificates, assuming they exist.

“If you live in a flood zone and your property was built in the last few decades [an elevation certificate] is probably what the insurance rates are based on,” he said.

Powell [Michael Powell, Flood Program Manager – State of Delaware] said the form provides legal descriptions of risk factors, such as floor heights, foundation type and predicted flood levels.
“These all impact flood insurance rates and the type of coverage you will have after a flood event,” he said.

In light of recent updates to flood maps, Powell advised residents confirm that their elevation certificates have been revised to reflect any changes.

Read the full article here.

Elevation plays a critical role in determining flood insurance rates and property owners need to pay particular attention to the base flood elevation of their structure. Is the home or building above or below the community’s elevation standards? A couple of feet or inches, a few documentation errors or significant omissions, can make a considerable difference in the amount property owners pay for coverage or measures implemented to mitigate flood damage.

The Bottom Line

Property owners in or out of a flood zone must be proactive. Take advantage of a no-cost flood risk evaluation to learn if your property’s mandatory purchase requirement is justified or if the property qualifies for flood zone reclassification. You have a right to know if the cost of flood coverage is too high, too low, or unwarranted.

The flood risk evaluation reviews data and documents relating to an individual structure. It includes an examination of the elevation certificate for errors and omissions that adversely affect the price of coverage.  Submit your property details today or contact us for more information.