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Agent Breakout What You and Your Clients Need to Know about Rising Risks, Rising Rates, and Their Effects on Rebuilding Decisions.

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Presentation on theme: "Agent Breakout What You and Your Clients Need to Know about Rising Risks, Rising Rates, and Their Effects on Rebuilding Decisions."— Presentation transcript:

1 Agent Breakout What You and Your Clients Need to Know about Rising Risks, Rising Rates, and Their Effects on Rebuilding Decisions

2 2 What Well Talk About Questions and Concerns BW-12 ABFEs and Building Higher.

3 3 Questions and Concerns What are you hearing? What are you hoping to learn today?

4 4 What Your Clients Need to Know Flood risks are changing. Risks may have increased since the last maps. Flood insurance rates will reflect those changes. With new maps, rates on many properties will rise. You can no longer rely on subsidized rates. Most subsidized rates for older properties will be eliminated. Building or rebuilding higher lowers your risk and could save you money. Consider flood insurance when making construction decisions.

5 5 BW-12 The Biggert-Waters Flood Insurance Reform Act of 2012

6 6 BW-12: Whats Changing Subsidies to be phased out Non-primary residences Business properties Severe repetitive loss properties (1-4 residences), and properties where claims payments exceed fair market value New policies to be issued at full-risk rates After the sale/purchase of a property After a lapse in insurance coverage After substantial damage/improvement For properties uninsured as of BW-12 enactment Grandfathered rates planned to be phased out over 5 years

7 7 Rates will increase 25 percent per year until they reflect the full- risk rate. Changes effective January 1, 2013, at policy renewal Pre-FIRM: Built before the communitys first Flood Insurance Rate Map became effective and not been substantially damaged or improved Non-primary residence: A building that will be lived in for less than 80 percent of the year Changes for Non-Primary Residences

8 8 Changes to Other Subsidized Rates Rates on pre-FIRM commercial buildings Increase by 25% a year until they reach full-risk rates. Rates for repetitively flooded buildings (known as Severe Repetitive Loss properties) of one to four residences increase 25% a year until they reach full-risk rates Includes buildings with cumulative flood insurance payments that meet or exceed fair market value These changes planned to start August 1, 2013

9 9 Direct Move to Full-Risk Rates After the sale/purchase of a property Subsidized rates can no longer be assigned to the new owner. After a policy lapse Policyholders should know that allowing a policy to lapse could be costly. When a new policy is issued Policies for buildings uninsured as of the date BW-12 was enacted These changes also planned to start August 1, 2013

10 10 What About Grandfathering? Grandfathering will be phased out BW-12 calls for a phase-out of discounts, including grandfathering provisions, and a move to full actuarial rates Section implementation anticipated in 2014 Phase-in to full-risk rates anticipated to begin

11 11 BW-12 Timeline DATE BW-12 IMPLEMENTATION STEP July 6, 2012BW-12 becomes law; reauthorizes the NFIP for five years and requires FEMA to eliminate discounts and subsidies January 2013Subsidized rates phased out for non-primary residences February 2013 and ongoingFEMA anticipates issuing additional guidance and details on BW-12 implementation Planned August 2013Subsidized rates anticipated to phase out for business properties, SRL properties, and others. Move to full-risk rates after sale/purchase of property, substantial damage/improvement or policy lapse. Planned 2014FEMA anticipates implementing phase-in of full risk rates for properties affected by map changes

12 12 BW-12 Bottom Line The elimination of subsidies and discounts could mean big increases for some property owners Properties that do not meet current requirements (e.g., below the current Base Flood Elevation) could see rates increase dramatically. Properties that meet current requirements still could see increases when new maps show higher risk So how can you help clients save money?

13 13 Saving Money on Flood Insurance FEMA has programs to help owners reduce their risk and save money on flood insurance Community-wide discounts through the Community Rating System (CRS) FEMA grant programs support rebuilding and relocating Use of higher deductibles to lower premium costs But the smartest way to save may be to build higher

14 14 Increased Cost of Compliance - ICC Out of Compliance ICC claim is separate from the flood damage claim filed Requires a separate Notice of Loss from the community Must build to adopted local ordinance; advisory data does not apply unless adopted

15 15 How to Apply for ICC Get an estimate for the project Submit estimate and Substantial Damage Determination Letter Adjuster will review 4 Years to complete project 15

16 16 Elevation: Building at or above ABFEs

17 17 Using ABFEs to Guide Decisions Advisory maps look much like Flood Insurance Rate Maps (FIRMs) However, changes in elevation or zone shown on advisory maps are not used for flood insurance rating Advisory data do indicate the likely direction of future insurance requirements ABFEs are a useful guide for rebuilding. However, your clients should realize that new maps could show even higher risk than shown on ABFEs

18 18 The Economics of Elevation With BW-12 many structures that currently are not elevation-rated will need to be Elevating above the current BFE (as shown on the effective FIRM) offers premium savings today Elevation at or above the ABFE offers savings when new maps become effective

19 19 BW-12 and Rebuilding Decisions Elevation lowers premiums. ZONE A EXAMPLE Elevating 3 feet above the BFE could lower premiums significantly! Homes built below BFE could be hit hard by an increase to full-risk rates

20 20 BW-12 and Rebuilding Decisions Future insurance savings can offset higher construction costs. ZONE V EXAMPLE (ABFE SHOWS 4 HIGHER RISK) ELEVATION /COSTS 4 ft8 ft10 ft Foundation $18,000$29,000$30,000 Flood Insurance/yr $17,500$ 7,000$ 3,500 Mortgage increase + flood/yr $17,500$ 7,588$ 4148 Peace of Mind Homeowner pockets more than $13,000/year compared to the current BFE

21 21 Other V Zone Considerations Waves exert tremendous force; buildings in V zones must offer minimal wave resistance Buildings in V zones must use pier/piling construction and be free of obstruction below the BFE (breakaway walls OK) Using these smart building practices also increases safety for buildings near V zones

22 22 Homes With Basements Homeowners with basements in high-risk zones face difficult choices Restricted coverage High risk of water damage Options Fill in basement Or pay more for flood insurance

23 23 Takeaway: What to Tell Clients

24 24 Communicating With Your Clients What else will you communicate to your clients about flood risk and flood insurance, including BW- 12 and ABFEs? How will you communicate with your clients? What additional resources would you like to have? What is your personal action plan to get the message out?

25 25 For Additional Information Visit for many resources, Increased Cost of Compliance: How You Can Benefit Increased Cost of Compliance: Creating a Safer Future Changes in the Flood Insurance Program: Preliminary Considerations for Rebuilding FEMA Building Science Resources to Assist with Reconstruction after Hurricane Sandy Hurricane Sandy Advisory Base Flood Elevations in New Jersey and New York Advisory Base Flood Elevations (ABFE) Frequently Asked Questions For information on flood insurance and BW-12 WYO Bulletins at Call the National Flood Insurance Program Help Center at Visit to access additional information as it becomes available.

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