floodsmart presents info on affects of map changes 5-2012

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


Introduction

Flood Insurance – Basic Review


Levees & Zone D

Coastal & the LiMWA

Summary

Questions

Agenda

2


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


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


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


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)


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


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


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

16


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


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


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


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)


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


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


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


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


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 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


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


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


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


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


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 -SUMMARY-

54


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!


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!

floodsmart presents info on affects of map changes 5-2012

Documents

flood map available

flood risk flood risks

flood insurance preferred

options effects of map

flood insurance manual

firm d

firm v

initial firm