Flood Insurance Update-- legislators pressing for 4 year delay of implementation
Following more than 17 extensions and two expirations since September 2008, the Biggert-Waters Flood Insurance Reform Act of 2012 was passed in June 2012 as part of a transportation funding bill and signed into law by the president on July 6, 2012. As part of the 5-year re-authorization of the NFIP, all properties that were previously paying below full actuarial rates will end their subsidy and begin paying the full rate. This started October 1, 2013 for pre-FIRM properties.
Here is a breakdown of the changes and how they may affect you and/or your clients:
Elevation certificates are needed for all properties. The only clear way to know how your rate will be affected is to provide your insurance agent with an elevation certificate. Depending on the age and use of your structure, it will vary. It’s important to note each property – even those side by side – are unique and you will not know actual flood insurance costs until you talk to an insurance agent.
UPDATE: 1/16/14: You may hear about a flood insurance premium delay in the Omnibus Appropriations Bill that passed Congress this week – this delay is for implementing future premium increases on grandfathered (post-FIRM) properties only for the next 9 months. This does not address the devastating subsidized (pre-FIRM) point of sale premium increases hurting our real estate market. The Omnibus Appropriations Bill prohibits funding for implementing future premium increases on “grandfathered properties” only. It does not include a delay for the home buyers who have already seen rate increases over the past year.
The good news is – the U.S. Senate plans to vote on legislation that would create a 4-year “time out” for both impacted home buyers and future increases on “grandfathered” properties. The Senate Majority Leader has promised the sponsors a vote on S. 1846 Homeowner Flood Insurance Affordability Act which would delay any increases for 4 years; they are currently negotiating the number of amendments and amount of debate time. The bill is expected to come up the week of January 27 if not as soon as today. Both South Carolina senators, Tim Scott and Lindsey Graham, are co-sponsors of S.1846. If it passes the U.S. Senate this month, it would still have to clear the U.S. House of Representatives and that is a high hurdle to clear — although Congressman Mark Sanford supports the bill.
This includes Pre-FIRM properties below Base Flood Elevation (BFE). Pre-FIRM in Charleston County means start of construction or substantial improvement was before 1975. To determine the pre-FIRM date for every city and county in South Carolina, click here.
Beginning when the policy renews starting October 1, 2013, rates will move to full actuarial rates at the time the property sells (this will apply retroactively to all properties sold since July 6, 2012).
Non-primary residences, commercial properties and repetitive loss properties:
Beginning October 1, 2013 rates move to actuarial rates and premiums will increase 25% per year. The only way to know your full actuarial rate and to find your maximum premium is to have a current elevation certificate. Access FEMA’s 2013 Rate Schedule for second/vacation homes here (which includes the first 25% step increase)
Note: Rates are per $100 of coverage.
This includes post-FIRM properties that were built at Base Flood Elevation, but BFE has since been raised since construction OR the property was mapped into a different flood zone.
Rates will be phased out and be brought to new actuarial rates only after the new flood rate maps are adopted. This is expected to be completed in South Carolina in late 2014 or early 2015.
ALL OTHER PROPERTIES REQUIRING FLOOD INSURANCE
All other properties will see rate increases of at least 5%, but possibly higher (in the 20% range), but each property is different. Advise your clients to speak to an insurance agent before buying.