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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. The National Flood Insurance Program. Created in 1968 since private flood insurance was difficult to find

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swcs winter meeting

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

the national flood insurance program
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
the problem
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
biggert waters flood insurance reform act of 2012
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
biggert waters flood insurance reform act of 20121
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
biggert waters flood insurance reform act of 20122
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
changes for pre firm structures
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

changes for pre firm structures1
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
phasing out of subsidized rates
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
phase in example
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

Year 4

Year 2

Year 3


Year 1

direct move to full risk rates
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


Year 1

who does this impact
Who Does This Impact?

Retaining subsidies until sold or lapsed: Pre-FIRM primary residences (578K)

No immediate subsidy removal: pre-FIRM condos, 5+ family residences (244K)

25% Phase-In: Non-primary residences, non-residential buildings, SRLPs (253k)

Unsubsidized pre-FIRM policies (4.480 M)

impacts new england
Impacts: New England

New Hampshire
















Rhode Island





Not subsidized

25% Phase –in

Direct Move to Full-Risk

Multi-family, 5+ units




impacts connecticut
Impacts: Connecticut

Tolland County


Hartford County


Windham County

Litchfield County



New London County

Fairfield County


Middlesex County



New Haven County


grandfathering eliminated
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



effects on impacted properties
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
potential mitigation strategies
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
legislative changes
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

Joseph Canas, PE, LEED AP, CFM

Project Manager

Tighe & Bond

1000 Bridgeport Avenue

Shelton, CT 06484

(203) 712-1109