N ATIONAL F LOOD I NSURANCE P ROGRAM (NFIP): T HE B ASICS & U PDATE ON THE C URRENT S TATE OF A FFAIRS Mary-Carson Stiff, JD, CFM Shannon Hulst Jarbeau,

NATIONAL FLOOD INSURANCE PROGRAM (NFIP):THE BASICS & UPDATE ON THE CURRENT STATE OF AFFAIRS

Mary-Carson Stiff, JD, CFMShannon Hulst Jarbeau, CFM

Closing the Deal: How to respond to the new realities of flood insurance

May 19, 2015

THE NATIONAL FLOOD INSURANCE PROGRAM (NFIP) – OVERVIEW

• Voluntary insurance program that local governments (cities, counties, towns, etc.) may choose to join.

• Created in 1968 by the National Flood Insurance Act

• Managed by the Federal Emergency Management Agency (FEMA)

THE NATIONAL FLOOD INSURANCE PROGRAM (NFIP)

• MAP: Mapping Flood Hazards• Where will it flood during storms?

• RISK: Managing Floodplains (High Risk Areas)• To receive the benefits of enrolling in the

NFIP, local governments must meet a number of minimum regulatory requirements • Ex: Reducing flooding through zoning, building codes, etc.

• INSURE: Providing Flood Insurance • Flood insurance premiums at a low-cost

THE NATIONAL FLOOD INSURANCE PROGRAM (NFIP) – BENEFITS

• Joining the NFIP allows citizens and businesses within a locality to receive flood insurance that is typically low-cost, as compared to many private companies

• Joining the NFIP makes local governments eligible to receive certain disaster assistance grant $$ after storm events

• Over time, localities become safer by implementing regulations to protect people and property from flooding

NFIP: MAPPING FLOOD HAZARDS – THE SFHA

• When a local government enrolls in the NFIP, FEMA creates maps for the land according to different levels of flood risk • Maps are divided by ZONES that identify levels of risk

• The high-risk areas, or those areas most prone to flooding, are called “Special Flood Hazard Areas” (SFHA)

• The SFHA represents how far and how high flood waters will reach during the 100-year-storm• The 100-year-storm is a storm producing flooding that has a 1%

chance of happening in any given year

NFIP: WHY DO WE CARE ABOUT SFHAS?

• RISK: There is a 26% chance that a property located in the SFHA will experience flooding over the course of a 30-year mortgage

• INSURANCE: Properties located in the SFHA that have a mortgage from a federally regulated or insured lender, then flood insurance is required.

• Flood insurance is NOT included in traditional homeowners insurance

• NOTE: Banks may require property owners to purchase flood insurance, even if the property is located outside the SFHA.

MAPPING FLOOD HAZARDS: SPECIAL FLOOD HAZARD AREA (SFHA) ON VIRGINIA’S PENINSULAS

Dark Blue = SFHA

Source: http://riskmap3.com/VA

MAPPING FLOOD HAZARDS: FEMA FLOOD MAP FOR MATHEWS, VIRGINIA

SFHA = Flood Zones that begin with

A or V

Red = Zone VEBlue = Zone AEYellow/Tan = Zone X

SFHA = Red & Blue

Source: http://maps.riskmap3.com/VA/Mathews/

MAPPING FLOOD HAZARDS: FEMA FLOOD MAP FOR MATHEWS, VIRGINIA (ZOOMED IN)

SFHA = Flood Zones that begin with

A or V

Red = Zone VEBlue = Zone AEYellow/Clear = Zone X

SFHA = Red & Blue

Source: http://maps.riskmap3.com/VA/Mathews/

MAPPING FLOOD HAZARDS: SPECIAL FLOOD HAZARD AREA

MAPPING FLOOD HAZARDS: DIRECTING PROPERTY OWNERS, BUYERS, SELLERS TO FLOOD MAPS

• In Person: Individuals can call the city/county office and ask to speak with the floodplain manager to see whether a property is located in the SFHA and whether flood insurance is required

• Online: Individuals can determine their own flood risk by accessing flood maps for coastal Virginia online:http://riskmap3.com/VA

NFIP: PROVIDING FLOOD INSURANCE

• NFIP offers affordable coverage & is available almost everywhere in US• Get NFIP policy through local agents

• FEMA determines flood insurance rates for the NFIP using flood maps

• Required for properties located in the SFHA zones

• Flood insurance is not included in homeowners insurance

NFIP: POLICIES IN UNITED STATES

NFIP: FLOOD INSURANCE REFORMS

• NFIP is $24 Billion in debt

• Congress passed law reforming the NFIP to resolve debt

• Rates are increasing for ALL POLICYHOLDERS

• Some policyholders have been paying way less than they should based on flood risk• These policyholders will experience the greatest

rate increases

NFIP: FLOOD INSURANCE REFORMS

Average Rate Increase = 20%

Maximum Rate Increase = 37%

RECOMMENDATIONS & TIPS

• Encourage SFHA policyholders to get an elevation certificate• Elevation certificates ensure accurate premium ratings -

contact a surveyor

• Structural renovations to reduce flood risk and lower NFIP premium

• Example: Elevating a structure, installing flood vents

• Encourage localities to participate in the NFIP’s Community Rating System to reduce flood insurance premiums

• Advise property-buyers to purchase NFIP policies early in transaction process• Be aware of 30-day waiting period and force-placement

RESOURCES

• Floodsmart.gov

• FEMA Resources

• Coastal Virginia Flood Maps

• Wetlands Watch Policyholder Guide

QUESTIONS?

Mary-Carson Stiff, [email protected] Hulst Jarbeau, [email protected]