Effects of Map Changes on Flood Insurance
National Flood Conference Austin, TX May 7-9, 2012
Bruce A. Bender – FloodSmart/Bender Consulting Services, Inc. Dorothy Martinez, CFM - H2O Partners, Inc.
EFFECTS OF MAP CHANGES ON FLOOD INSURANCE Explaining the risk. Knowing the options
Effects of Map Changes on Flood Insurance
Introduction
Flood Insurance – Basic Review
Effects of Map Changes on Flood Insurance
Levees & Zone D
Coastal & the LiMWA
Summary
Questions
Agenda
2
Effects of Map Changes on Flood Insurance
Risk MAP
Watershed approach
Re-analyzing and re-mapping all four coasts; “new” terms
Continue levee accreditation; new analysis approach
Providing tools to help better communicate flood risk
Flood risks will continue to change
Introduction
3
Effects of Map Changes on Flood Insurance
FLOOD INSURANCE Basic Review
4
Rating
Essentials
Pre-FIRM
Post-FIRM
Effects of Map Changes on Flood Insurance Essential Elements of Rating
• Community Name
• Emergency vs. Regular
• Date of construction
• Pre-FIRM vs. Post-FIRM
• Flood Zone
• Elevation Difference
• CRS Discount
• Occupancy type
• Number of floors
• Basement/Enclosure
• Cov./Deductible/Fees
5
Effects of Map Changes on Flood Insurance
Pre-FIRM “Old Standards”
Built before initial FIRM
or
On or before 12/31/1974
Post-FIRM “New Standards” or “In
Compliance”
On or After the initial FIRM
or
After 12/31/1974
…whichever is LATER
Two Rate Structures:
6
Effects of Map Changes on Flood Insurance
30-days
1-day
0 days
Effective Dates
7
Effects of Map Changes on Flood Insurance Preferred Risk vs. Standard
Preferred Risk Premiums Must be in Zone B, C, or X at time of
application*
Fixed premiums; fixed limits
Limited loss history
Standard Rates Rate Tables provided in Flood Insurance
Manual
Risks not eligible for Preferred Risk Policy
Flexible limits
NOTE:
The flood map
available at the time of
the renewal offer
determines a building’s
continued
eligibility for the PRP*.
8 *Exceptions apply to policies eligible for Two-Year PRP Extension
Effects of Map Changes on Flood Insurance Rate Comparison- Pre-FIRM and B, C, X
9
FIRM/ZONE PREMIUM*
PRE-FIRM A $2,379
PRE-FIRM V (without enclosure) $4,992
PRE-FIRM (with enclosure) $6,853
PRE-FIRM D $2,379
ALL Buildings B, C, X (Standard) $1,511
ALL Buildings B, C, X (Preferred) $ 343
*$200K/$80K building/contents; single family; no basement; $1,000 ded. ($2,000 for Pre-FIRM A)
Effects of Map Changes on Flood Insurance Rate Comparison- Post-FIRM A & V Zones
10
FIRM/ZONE PREMIUM*
POST-FIRM A
+3 $ 498
+1 $ 834
-1 $ 5,347
POST-1981 VE (without obstruction)
+3 $ 2,106
+1 $ 4,350
-1 $ 9,562
POST-1981 VE (with obstruction)
+3 $ 4,086
+1 $ 6,402
-1 $11,214
*$200K/$80K building/contents; single family; no basement; $1,000 ded. ($2,000 for Pre-FIRM Zone A)
Effects of Map Changes on Flood Insurance
PRP Eligibility:
Is extended as per memorandum W-10076 dated 07/15/2010
Effective 01/01/2011
Two-Year PRP Eligibility Extension
11 http://www.nfipiservice.com/stakeholder/pdf/bulletin/w-10076.pdf
Effects of Map Changes on Flood Insurance
The key points of PRP Extension are: It was developed to address the financial burden of mandatory
purchase requirements on policy holders in newly mapped areas
Buildings newly designated within the SFHA due to a map revision on or after October 1, 2008, are eligible for coverage under the PRP for a period of up to two years* after the later of the two following dates:
The effective date of the map revision, or
January 1, 2011
Loss history requirements must be met
Two-Year PRP Eligibility Extension
12 *After two year extension, the policy must be re-rated using standard
rates (using the current map’s zone or the grandfathered zone).
Effects of Map Changes on Flood Insurance Two-Year PRP Eligibility Extension
13
Eligible for PRP for 2 policy
years
from effective date of map
change
Eligible for PRP for 2 policy
years
from effective date of map
change
Eligible for PRP for 2 policy years effective between 01/01/2011-
12/31/2012
(2) Buildings newly designated
within an SFHA due to map revision
on or after 01/01/2011
(1) Buildings newly designated
within an SFHA due to map revision
on or after 10/01/2008, and before 01/01/2011
10/01/2008 01/01/2011 12/31/2012 …Ongoing
Eligible for PRP for 2 policy years from effective date of map
change
We are here
Effects of Map Changes on Flood Insurance
How does the PRP extension affect lenders? Insurance Carrier, not lender, validates PRP extension eligibility
Effective 10/1/2010, NFIP declarations pages began displaying two flood zones:
Current Flood Zone: Flood zone of property on current (revised) Flood Insurance Rate Map (FIRM)
Flood Risk/Rated Zone: Flood zone from the previous map used to rate policy
Lenders are not required to investigate or resolve differences between Current Flood Zone and Flood Risk/Rated Zone
Lender Considerations
14
Effects of Map Changes on Flood Insurance Rated Zone/Current Zone
15
Effects of Map Changes on Flood Insurance
Effects of Map Changes On Flood Insurance
16
Effects of Map Changes on Flood Insurance
Properties move into a high-risk zone (A or V) from a low- or moderate risk zone (B, C, D, X)
(e.g. PRP Extension, Grandfathering)
Properties move into a moderate- or low-risk zone (B, C, D, X) from a high-risk zone (A or V)
(e.g. Conversion)
There is a change in Base Flood Elevation (BFE)
There is a change in vertical datum
There is no change….but are they fully insured?
Effects of Map Changes on Insurance
17
Effects of Map Changes on Flood Insurance
Properties mapped from lower risk zones to higher risk zones
Low Risk
High Risk
18
Effects of Map Changes on Flood Insurance NFIP “Grandfather” Rules
• Allows a property owner affected by recent map changes to:
– “LOCK” in a Flood Zone
– “LOCK” in a Base Flood Elevation
*Also applies to properties being mapped from an “A” zone to a “V” zone 19
Effects of Map Changes on Flood Insurance
BENEFIT OPTIONS:
Use the current rating criteria for that property; or
Have the premium rate determined by:
when coverage was first obtained; or
the BFE and/or flood zone on the FIRM (old map) in effect when the building was originally constructed
NFIP “Grandfather” Rules
20
Continuous
Coverage
Built in
Compliance
Effects of Map Changes on Flood Insurance Continuous Coverage
If policy was obtained prior to the effective date of the map change:
– Can be purchased up to the day before the map’s effective date
– Rates can be based on current zone/BFE
– Continuous coverage must be maintained
– Can be assigned to a new owner
21
Effects of Map Changes on Flood Insurance Previous Map (May 25, 2009)
Zone X in 2009
22
CITY OF FLOODVILLE
MAY 25, 2009
Effects of Map Changes on Flood Insurance New Map (May 1, 2013)
ZONE AE
23
CITY OF FLOODVILLE
May 1, 2013
Effects of Map Changes on Flood Insurance
Renew PRP (1st
year extension)
April 30, 2014
PRP 2-Year Extension & Grandfathering
Purchase PRP to
be effective
April 30, 2013
Map Effective
May 1, 2013
Renew using Standard
X zone rates
April 30, 2016
Renew PRP (2nd
year extension)
April 30, 2015
PRP Extension Grandfathering
$343* $1,511 vs. $343 $343
*These premiums are for illustration purposes only; they actually could increase each year due to normal increases in rates for that
zone. Premiums are for $200,000 building/$80,000 contents as of October 1, 2011.
** Pre-FIRM Zone A premium if not grandfathered (October 1, 2011 rates)
$2,379**
Effects of Map Changes on Flood Insurance Built in Compliance
If building was constructed in compliance with a specific FIRM*
– Use that map’s zone or BFE at time of construction
– Submit proof to carrier
– Continuous coverage not required
25
* With limited exceptions, because there was no FIRM in effect on the date of construction, most Pre-FIRM construction is ineligible for the “built in compliance” grandfathering rule. (refer to RATE 23)
Effects of Map Changes on Flood Insurance
Your Source for Previous Flood Maps
Historic Maps
26
Find “historic” flood maps through the MSC Product Catalog.
Effects of Map Changes on Flood Insurance Previous Map | Previous BFE
27 *Lowest Floor Elevation: 77 ft
77’-76’= +1 (Elevation Difference)
CITY OF FLOODVILLE
Effects of Map Changes on Flood Insurance New Map | New BFE
Use current BFE (-1): $ 5,347 *Lowest Floor Elevation: 77 ft **$200K/$80K Building/Contents Oct 2011 28
77’-78’= -1 (Elevation Difference)
CITY OF FLOODVILLE
APRIL 11, 2012
Effects of Map Changes on Flood Insurance
Purchase Standard
Zone A
(+1 above BFE)
“Lock” in Previous BFE (Built in Compliance)
+1 above BFE
No insurance
Map Effective
April 11, 2012
Renew using Standard
Zone A rates
(+1 above BFE)
Renew using
Standard Zone A
(+1 above BFE
-1 below BFE
Grandfathered Rated using +1
$834 $834 $834
*These premiums are for illustration purposes only; they actually could increase each year due to normal increases in rates for that
zone. Premiums are for $200,000 building/$80,000 contents as of October 1, 2011.
** $5,347 at (-1 below BFE) if not grandfathered (October 1, 2011 rates)
+1 above BFE
Effects of Map Changes on Flood Insurance What’s the best rate?
30
Best Rate?
OPTION 1
Buy Insurance BEFORE map changes (PRP)
OPTION 2
Take advantage of Two Year PRP
Eligibility Extension
OPTION 3
Use NEW Zone or/BFE*
OPTION 4
Use OLD zone or BFE at time of
construction*
REMEMBER that Zone X
may not be the best rate! *At the end of the two year PRP extension or if not eligible for PRP
Effects of Map Changes on Flood Insurance Which Zone Do You Use?
Post-FIRM Example*: X zone vs. AE zone
(At BFE)
*$200K/$80K Building/Contents -Oct 2011
At BFE
“Locked” X Zone
(Standard X Zone)
$1,511*
New AE Zone (At BFE)
$1,651
At BFE
*After PRP eligibility is no longer available 31
Effects of Map Changes on Flood Insurance Which Zone Do You Use?
Post-FIRM Example*: X zone vs. AE zone
(+2 BFE)
*$200K/$80K Building/Contents-Oct 2011
“Locked” X Zone (Standard X Zone)
$1,511*
New AE Zone (+2 BFE)
$ 570
+2 above BFE
+2 above BFE
32 *After PRP eligibility is no longer available
Effects of Map Changes on Flood Insurance
1. All policies that are eligible for the Two-Year PRP Extension can be grandfathered (using standard rates)
2. But, not all grandfathered policies are eligible for the Two-Year PRP Extension
Eligible to be grandfathered
Eligible for Two-Year
PRP Extension
Here’s the Bottom Line
33
Effects of Map Changes on Flood Insurance
Properties Being Mapped from a High-Risk Zone to a Low-Moderate Risk Zone (Conversion)
High Risk
Low Risk
34
Effects of Map Changes on Flood Insurance Conversion
For properties moving from high to moderate- or low- risk zones
Created to encourage policyholders to maintain coverage (“Risk is reduced; not removed”)
35
Effects of Map Changes on Flood Insurance
Procedure:
Ensure property is eligible for PRP (e.g. losses, zone)
Chose proper PRP building limit (note: contents are included)
Rewrite existing SFIP as a PRP, using last renewal date before map change
Conversion
36
Effects of Map Changes on Flood Insurance Conversion
Results: No gaps in coverage (no 30-day wait)
A refund to the policyholder (“Stay covered and get money back”)
Strengthened customer loyalty for the agent
Agent keeps commission on old and new policy
37
Effects of Map Changes on Flood Insurance
EFFECTS OF CHANGE IN VERTICAL DATUM
38
Effects of Map Changes on Flood Insurance V.D. Problem
When rating, always look at the vertical datum used on the FIRM and on the EC
If they are the same (e.g. both NAVD88 or NGVD 29), no problem
If they are different, then you must convert one, or you will have a problem Average conversion factor may be
on the map panel Conversion factor will be in the FIS
39
Effects of Map Changes on Flood Insurance
PROPERTIES WITH NO CHANGE
40
CHANGE
Effects of Map Changes on Flood Insurance No Change
Still at risk; know the level of risk If currently has flood insurance:
Is it at current replacement cost?
Are the contents fully covered?
If not currently covered for flood: Do they qualify for a PRP?
If they don’t want coverage, have them decline in writing to the agent!
41
Effects of Map Changes on Flood Insurance
Levees…Levees….Levees
42
Effects of Map Changes on Flood Insurance Levees…Levees…Levees
Levees provide protection…….
43
Levees provide protection……. only reduce risk!
Effects of Map Changes on Flood Insurance Levees…Levees…Levees
44
Effects of Map Changes on Flood Insurance Levees…..Levees…..Levees
If the levee is… Flood maps show
this risk…
…And these insurance
requirements apply
Non-accredited High flood risk (SFHA) Flood insurance required for most
structures
Accredited Moderate flood risk Flood insurance not required but
recommended
De-accredited High flood risk Flood insurance required for most
structures
Provisionally accredited
Moderate flood risk (2-
year documentation
window)
Flood insurance not required but
strongly recommended
Temporarily identified as In
Need of Maintenance
Flood risk remains as
currently designated
Flood insurance not required but
strongly recommended
45
Effects of Map Changes on Flood Insurance Proposed New Levee Analysis
46
LAMP – Four Scenarios
Sound Reach
Freeboard Deficient
Structural-Based Inundation
Overtopping
Effects of Map Changes on Flood Insurance Understanding Zone D
Possible but undetermined flood hazards
Flood insurance is available
No FEMA minimum building requirements
No federal mandatory purchase requirements
47
FIRM/ZONE PREMIUM*
PRE-FIRM A $2,379
PRE-FIRM D $2,379
POST-FIRM D $1,923
POST-FIRM A (no BFE;
+1 HAG) $2,834
POST-FIRM AE (+1) $ 834
PRE/POST-FIRM X $1,511
*$200K/$80K building/contents; single family; no basement; $1,000 ded. ($2,000 for Pre-FIRM Zone A)
Effects of Map Changes on Flood Insurance Understanding Zone D – Map Changes
Zone D to Zone X Eligible for Conversion
Zone D to Zone A Eligible for PRP Extension for 2 years;
Then must be Grandfathered using Zone D or use Zone A, whichever is cheaper
Zone X to Zone D Eligible for PRP Extension for 2 years and then must be
Grandfathered using Zone X
Zone A or AE to Zone D Determine best premium; grandfather or not
48
Effects of Map Changes on Flood Insurance
Coastal Re-mapping
49
Effects of Map Changes on Flood Insurance Basic Elements of a Coastal Floodplain Study
Base Flood Elevation on FIRM includes 4 components:
1. Storm surge stillwater elevation (SWEL)
2. Amount of wave setup – determined from the 2D wave and
surge models
3. Wave height above storm surge (stillwater + setup) elevation
4. Wave runup above storm surge elevation (where present)
Effects of Map Changes on Flood Insurance Mapping
Effects of Map Changes on Flood Insurance
Coastal Re-Mapping… What You Need To Know
Know the LiMWA Higher Risk; same AE rates
No Federal Insurance Requirement
CRS benefit for communities
Know how to rate and grandfather VE zone buildings
Know how CBRS Zones and OPAs may be affected
Boundary changes MAY AFFECT AVAILABILITY
Effects of Map Changes on Flood Insurance
Understand where and why these changes are occurring;
Become the expert in your area on explaining changes and rating options available
Coastal Re-Mapping… What You Need To Do
53
FIRM/ZONE PREMIUM*
PRE-FIRM V (no enclosure) $4,992
PRE-FIRM V (w/enclosure) $6,853
POST-’81 VE (w/o obstr;+1) $4,350
POST-’81 VE (w/obstr; +1) $6,402
POST-FIRM AE (+1) $ 834
PRE/POST-FIRM X $1,511
*$200K/$80K building/contents; single family; no basement; $1,000 ded. ($2,000 for Pre-FIRM V); 75% RC
Effects of Map Changes on Flood Insurance
Effects of Map Changes -SUMMARY-
54
Effects of Map Changes on Flood Insurance
Lower Risk to Higher Risk (or BFE) Use Current Zone or BFE
Take advantage of Grandfathering:
Continuous Coverage
Built in Compliance
May qualify for 2-Year PRP Extension
High-risk to Moderate-Low Risk Conversion
Converts existing policy to PRP
No gaps in coverage
Policyholder gets a refund and maintains coverage
Agent gets to keep both commission
Summary
55
Remember: Sometimes the
rate is better when using the
new maps;
Both options should be
checked!
Effects of Map Changes on Flood Insurance
Vertical Datum Changes
Ensure to use LFE and BFE that have the same vertical datum or one is converted to the other
No Changes
Are they fully covered…both building and contents
Understanding…
Levees
Zone D
Coastal Re-mapping
Summary (cont’d)
56
Effects of Map Changes on Flood Insurance Resources
57
• Consumer site
• Agent site: www.Agents.FloodSmart.gov
• Map Change and Outreach Toolkits
FloodSmart.gov
• http://www.fema.gov/library
FEMA Resource Library
• http://store.msc.fema.gov
Map Service Center (including historic maps)
•1-877-FEMA MAP
FEMA Map Information eXchange (FMIX)
•http://www.fema.gov/levee
FEMA Levee site
Effects of Map Changes on Flood Insurance QUESTIONS?
58
Bruce A. Bender FloodSmart/Bender Consulting Services, Inc. 480-368-1223 [email protected]
For more information:
Dorothy Martinez, CFM H2O Partners, Inc. 281-299-2222 [email protected]
I know, but calling it “Grandmothering” just doesn’t have the same effect!