swcs winter meeting biggert-waters (bw-12) flood insurance reform act – changes and impacts march...
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![Page 1: SWCS Winter Meeting Biggert-Waters (BW-12) Flood Insurance Reform Act – Changes and Impacts March 14, 2014 Joseph Canas, PE, LEED AP, CFM, Project Manager](https://reader036.vdocuments.net/reader036/viewer/2022070308/551b89a1550346a10a8b55cf/html5/thumbnails/1.jpg)
SWCS Winter Meeting
Biggert-Waters (BW-12) Flood Insurance Reform Act – Changes and Impacts
March 14, 2014
Joseph Canas, PE, LEED AP, CFM, Project Manager
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The National Flood Insurance Program
■ Created in 1968 since private flood insurance was difficult to find
■ Modified in 1973, requiring flood insurance for all mortgages through federally insured lenders
■ 40,000 stream miles mapped nationally
■ Participating communities responsible for enforcement of floodplain management regulations
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Coastal Exposure
• Value of coastal floodplain properties insured.
$ 527billion
• Number of jobs in U.S. coastal counties
51million
• Contribution in GDP from U.S. coastal counties
$ 6.6trillion
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Coastal Exposure
• Wages paid to employees working in coastal shoreline counties.
$ 2.8 trillion
• Rank in global GDP rank if U.S. coastal counties counted separately.
# 3
• U.S. Population living in coastal counties45%
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The Problem?
■ Severity and frequency of disasters has increased in recent years
■ The NFIP is supposed to be self-sufficient, but has had to borrow from the Treasury
■ Existing mapping models only current risk, and not sea level rise
■ Premiums under-represent the risk for many older structures
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How Bad is It?
19801981
19821983
19841985
19861987
19881989
19901991
19921993
19941995
19961997
19981999
20002001
20022003
20042005
20062007
20082009
20102011
20120
5000
10000
15000
20000
25000
30000
NFIP Debt ($MM)
Debt ($MM)
Katrina
Sandy
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Biggert-Waters Flood Insurance Reform Act of 2012
■ Reauthorizes National Flood Insurance Program for 5 years
■ Existing Subsidies Phased Out
■ Mapping Initiatives
■ Intended to make program more sustainable
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Biggert-Waters Flood Insurance Reform Act of 2012
■ Increases penalties for lenders who do not comply with flood insurance purchase requirements– Increases from $ 350 to $ 2,000 per violation
■ Allows for escrow of flood insurance for loans made beginning October 1, 2014
■ Requires FEMA to:– Build up reserve fund of 1% of the
total of all policies– Repay debt within 10 years
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Biggert-Waters Flood Insurance Reform Act of 2012
■ Authorizes $400 million annually for mapping
■ Removes restriction that states may only contribute 50 percent of mapping costs
■ Requires lenders disclose availability of flood insurance under NFIP to all borrowers
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Changes for Pre-FIRM Structures
Pre-FIRM Structure:
Built before the community’s first Flood Insurance Rate Map (FIRM) became effective, and has not been substantially damaged or improved. The premiums for these structures are subsidized by the NFIP, and do not reflect the full actuarial rate for their risk.
Substantial Damage / Substantial Improvement:
Damage or improvement to a structure totaling 50% or more of the structure’s fair market value
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Changes for Pre-FIRM Structures
■ Subsidized rates to be phased out:– Non-primary residences– Business properties– Severe repetitive loss properties (up to 4 family
residences)– Properties where claims payments exceed fair market
value
■ New policies issued at full-risk rates:– After the sale / purchase of a property– After a lapse in coverage– After substantial damage / improvement– Properties uninsured as of October 1, 2012
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Phasing Out of Subsidized Rates
■ Rates to increase 25% per year for pre-FIRM buildings until they achieve full risk rate.
■ Non-primary residences– Effective January 1, 2013
■ Non-residential, severe repetitive loss, and payments exceeding FMV– Effective October 1, 2013
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Phase-In Example
■ Pre-FIRM structure■ 3 feet below base flood elevation■ Slab-on-grade■ Coverage: $ 200K Building / $ 80K Contents■ Existing Premium = $ 2,964■ Full Risk Premium = $ 7,922
$ 2,968 $ 3,710 $ 5,797 $ 7,246 $ 7,922
Existing Year 1 Year 2 Year 3 Year 4
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Direct Move to Full-Risk Rates
■ Sale/purchase of a property after July 5, 2012
■ When a new policy is issued after July 5, 2012
■ After a policy lapse after October 4, 2012
$ 2,968 $ 7,922
Existing Year 1
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Non-Renewal Notice
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Who Does This Impact?
No immediate subsidy removal: pre-FIRM condos, 5+ family residences (244K)
Retaining subsidies until sold or lapsed: Pre-FIRM primary residences (578K)
25% Phase-In: Non-primary residences, non-residential buildings, SRLPs (253k)
Unsubsidized pre-FIRM policies (4.480 M)
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Impacts: New England
Maine
36%policies
impacted
New Hampshire
41%policies
impacted
Vermont
53%policies
impacted
Massachusetts
42%policies
impacted
Rhode Island
42%policies
impacted
Connecticut
45%policies
impacted
Not subsidized
25% Phase –in
Direct Move to Full-Risk
Multi-family, 5+ units
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Impacts: Connecticut
Litchfield County
Fairfield County
New Haven County
Middlesex County
New London County
Windham County
Tolland County
Hartford County
46%
43%
39%
44%
45%44%
38%
35%
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Grandfathering Eliminated
■ Grandfathering – If an insured property was mapped to a
higher risk zone or elevation, the additional premium was subsidized
■ BW-12 ends Grandfathering– Phase in to full risk rates at 20% a year – Begins late 2014
■ New maps updated coastal hazards, but do not project impacts of sea level rise– Validity of coastal models has been raised,
successfully challenged in Rockport, MA
2010
2013
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Effects on Impacted Properties
■ Property values have declined, or will decline steeply
■ Some homes may be unsellable
■ Some property owners will not be able to afford flood insurance required by their lenders
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Potential Mitigation Strategies
■ Elevate existing homes
■ Educate homeowners that risk changes over time
■ Obtain grants for FEMA assistance for elevating / relocating
■ Increase deductibles
■ Community participation in CRS
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Legislative Changes?
■ Numerous legislative responses have been proposed:– Delay implementation of entire BW-12 legislation pending affordability
study– Extend phase-in period to 10 years– Means-tested voucher program for flood insurance premiums /
relocations
■ HR 3370 (Menendez-Grimm) approved by House on March 5, 2014– Premium increases capped at 18% total– Repeals new policy and property sales triggers– Reinstates grandfathering– Refunds for those who overpaid permiums– Reimbursement of successful appeals
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Questions?
Joseph Canas, PE, LEED AP, CFMProject ManagerTighe & Bond1000 Bridgeport AvenueShelton, CT 06484(203) [email protected]