Flood Insurance Program Changes Are Here—Are You Ready?

Flood Insurance Program Changes Are Here—Are You Ready?

OCTOBER 21, 2013

On October 1st, additional changes to the National Flood Insurance Program (NFIP) mandated by the Biggert-Waters Flood Insurance Reform Act of 2012 went into effect. This law aims to strengthen the NFIP’s solvency by phasing out Federal flood insurance subsidies for property owners that have been in place since the program’s inception in 1968 and requiring the Federal Emergency Management Agency to set insurance rates that reflect a property’s actual flood risk. Currently, more than a million of the 5.5 million policy holders under the NFIP receive a subsidy. Beginning this month, business and home owners in areas that have experienced severe floods may see insurance rates increase substantially (ten times higher for some) over the next five years as their premium subsidy is gradually eliminated. Premiums have the potential to increase by 25 percent per year until the full-risk rates are reached.

As noted previously on our blog, the timing and methodology for the phasing out of the subsidies and the application of increased rates is complex. However, these increases may be reduced if property owners and municipalities act to meet certain criteria.

Options for Property Owners with Flood Insurance Rate Changes

FEMA has led a major effort to update the nation’s Flood Insurance Rate Maps (FIRMs) with new Base Flood Elevations (BFEs) for many communities. Flood insurance rates are determined by the relation between the BFE—the estimated elevation of a 100-year flood—and the elevation of the home or business.

NFIP Rates

Changes to a FIRM and an end to subsidies will increase flood insurance premiums for buildings below the BFE.

As new maps have been issued, many property owners have or will soon learn that their community’s flood risk designation has increased. These changes are impacting thousands of property owners in coastal or waterside communities in the Northeast and Gulf region, and, as the Boston Globe reports, property owners will often discover that the revised maps place them in a flood zone for the first time. And for some, the change has meant new flood insurance requirements from mortgage lenders, particularly if their property is located in a high-risk flood zone, known as a Special Flood Hazard Area (SFHA).

One option for property owners who want to avoid the higher insurance rate is to raise their home or business above the base flood level. According to the Globe, a regional insurance specialist for FEMA explained that elevating a property above the BFE would “substantially” reduce an insurance premium. The article also notes that raising a single-family home could cost between $40,000 and $100,000. Elevating a property is often financially impractical, but there are additional options available to property owners to reduce their rates.

If a new FIRM has been established and indicates a higher risk, the NFIP offers a temporary cost-saving option for some property owners through a Preferred Risk Policy Eligibility Extension to ease the transition to a higher insurance rate. Beginning January 1, 2013, FEMA made Preferred Risk Policies available for properties that were newly mapped after October 1, 2008.

In the past, many buildings were allowed to keep their original flood-risk rating even if the zone designation was changed in a later flood zone map. Beginning in 2014, the “grandfather” rule will be phased out and all buildings will be rated using the latest map for a community. Property owners have an opportunity to take advantage of specific grandfathering provisions and avoid a high-risk rate temporarily if an existing policy has been maintained before a new FIRM is applied. This rate would also apply if a structure was built in compliance with a FIRM in effect at the time of construction. Current NFIP policy holders whose property has been damaged from a flood may qualify for Increased Cost of Compliance insurance coverage. There are some areas where new rate maps have indicated a lower risk and thus lower premiums, so property owners should consult with their municipality when investigating flood insurance policy changes.

A summary of rate reduction options for property owners and more information on the Preferred Risk Policy, the Grandfather Rule, and the various conditions that apply can be found at Floodsmart.gov or at this helpful Biggert-Waters Act FAQ page (PDF).

Woodard & Curran Can Help Municipalities with Mitigation Efforts

Several members of Congress and state legislators have proposed to offer amendments that may slow the implementation of rate increases. Despite growing sentiment for additional review and delay, FEMA has indicated that without a change in legislation, the agency is compelled to move forward with reforms mandated by the Biggert-Waters Act.

In the meantime, there are ways for communities to be proactive and engage in efforts that will provide discounts on NFIP premiums for residents and businesses and mitigate flood risk.

Municipalities can earn premium discounts for their property owners through the NFIP’s Community Rating System (CRS)—a voluntary incentive program for communities that demonstrate efforts to mitigate flood impacts and implement comprehensive floodplain management. Communities can apply for a lower rate by crafting a detailed application to FEMA that documents, among other items, the extent and nature of a municipality’s public outreach efforts on flood risks and regulatory actions designed to reduce future property damage from flooding. “Most communities have already implemented and adopted items necessary for discounts in their local stormwater, zoning, and building ordinances,” says Woodard & Curran’s Jeff Stearns, PE, who has over 17 years of experience on flood planning projects.


The City of Salem is working with us to significantly reduce future floods.

Our firm helped put an approved Hazard Mitigation Plan in place, which made the City eligible for grant funding from FEMA to tackle their flood issues. With these resources, the City of Salem is working with Woodard & Curran to implement new stormwater drainage infrastructure improvements over the next several years that will help significantly reduce flooding in the future.

Federal, state, and regional assistance is available through a number of programs to fund mitigation efforts. Here are a handful of examples:

  • The Northeast Regional Ocean Council seeks to fund activities in New England coastal communities that improve resilience to coastal storms and meet the requirements of the CRS;
  • New Jersey’s Office of Emergency Management is providing Community Development Block Grants to help communities recover from Hurricane Sandy;
  • FEMA’s Hazard Mitigation Grant Program provides funding to implement long-term hazard mitigation projects, like those in Salem, MA, after a major disaster declaration;
  • The Flood Mitigation Assistance Program from FEMA provides funds for measures to reduce or eliminate risk of flood damage to buildings insured under the NFIP; and
  • The Pre-Disaster Mitigation Program provides grants from FEMA to municipalities or universities for hazard mitigation planning and projects before a disaster event.

Contact Alan Benevides at Woodard & Curran for more information on the National Flood Insurance Program, the Community Rating System, FEMA’s Hazard Mitigation Assistance, or other flood-related programs in your area.


National Practice Leader
Flood Mitigation

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