Agent Breakout
What You and Your Clients Need to Know about
Rising Risks, Rising Rates, and Their Effects on
Rebuilding Decisions
What We’ll Talk About
Questions and Concerns
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BW-12
ABFEs and Building Higher
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Questions and Concerns
What are you hearing? What are you hoping to learn today?
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What Your Clients Need to Know
 Flood risks are changing.
Risks may have increased since the last maps.
 Flood insurance rates will reflect those changes.
With new maps, rates on many properties will rise.
 You can no longer rely on subsidized rates.
Most subsidized rates for older properties will be eliminated.
 Building or rebuilding higher lowers your risk and
could save you money.
Consider flood insurance when making construction decisions.
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BW-12
The Biggert-Waters Flood Insurance Reform Act of 2012
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BW-12: What’s Changing
 Subsidies to be phased out
 Non-primary residences
 Business properties
 Severe repetitive loss properties (1-4 residences), and properties where claims
payments exceed fair market value
 New policies to be issued at full-risk rates
 After the sale/purchase of a property
 After a lapse in insurance coverage
 After substantial damage/improvement
 For properties uninsured as of BW-12 enactment
 Grandfathered rates planned to be phased out over 5 years
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Changes for Non-Primary Residences
 Rates will increase 25 percent per year until they reflect the full-
risk rate.
 Changes effective January 1, 2013, at policy renewal
Pre-FIRM:
Built before the community’s first
Flood Insurance Rate Map became effective
and not been substantially damaged
or improved
Non-primary residence:
A building that will be lived in for
less than 80 percent of the year
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Changes to Other Subsidized Rates
 Rates on pre-FIRM commercial buildings
Increase by 25% a year until they reach full-risk rates.
 Rates for repetitively
flooded buildings
(known as Severe Repetitive Loss
properties) of one to four residences
increase 25% a year until
they reach full-risk rates
Includes buildings with cumulative
flood insurance payments that meet
or exceed fair market value
 These changes planned to start August 1, 2013
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Direct Move to Full-Risk Rates
 After the sale/purchase of a property
Subsidized rates can no longer be assigned to the new owner.
 After a policy lapse
Policyholders should know that allowing a policy to lapse could be costly.
 When a new policy is issued
Policies for buildings uninsured as of the date BW-12 was enacted
 These changes also planned
to start August 1, 2013
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What About Grandfathering?
 Grandfathering will be phased out
BW-12 calls for a phase-out of discounts, including grandfathering
provisions, and a move to full actuarial rates
 Section 100207 implementation anticipated in 2014
Phase-in to full-risk rates anticipated to begin
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BW-12 Timeline
DATE
BW-12 IMPLEMENTATION STEP
July 6, 2012
BW-12 becomes law; reauthorizes the NFIP for five years and
requires FEMA to eliminate discounts and subsidies
January 2013
Subsidized rates phased out for non-primary residences
February 2013 and ongoing
FEMA anticipates issuing additional guidance and details on
BW-12 implementation
Planned August 2013
Subsidized rates anticipated to phase out for business
properties, SRL properties, and others. Move to full-risk rates
after sale/purchase of property, substantial
damage/improvement or policy lapse.
Planned 2014
FEMA anticipates implementing phase-in of full risk rates for
properties affected by map changes
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BW-12 Bottom Line
 The elimination of subsidies and discounts could mean big
increases for some property owners
Properties that do not meet current requirements (e.g., below the current Base Flood
Elevation) could see rates increase dramatically.
 Properties that meet current requirements still could see
increases when new maps show higher risk
So how can you help clients
save money?
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Saving Money on Flood Insurance
 FEMA has programs to help owners reduce their risk and save
money on flood insurance
• Community-wide discounts through the Community Rating System
(CRS)
• FEMA grant programs support rebuilding and relocating
• Use of higher deductibles to lower premium costs
But the smartest way to save
may be to build higher
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Increased Cost of Compliance - ICC
 Out of Compliance
 ICC claim is separate
from the flood damage
claim filed
 Requires a separate
Notice of Loss from the
community
 Must build to adopted
local ordinance;
advisory data does not
apply unless adopted
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How to Apply for ICC
 Get an estimate for the project
 Submit estimate and
Substantial Damage
Determination Letter
 Adjuster will review
 4 Years to complete project
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Elevation: Building at or above ABFEs
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Using ABFEs to Guide Decisions
 Advisory maps look much like
Flood Insurance Rate Maps (FIRMs)
 However, changes in elevation or zone
shown on advisory maps are not used for flood
insurance rating
 Advisory data do indicate the likely direction
of future insurance requirements
 ABFEs are a useful guide for rebuilding.
However, your clients should realize that
new maps could show even higher risk
than shown on ABFEs
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The Economics of Elevation
 With BW-12 many structures that currently are not elevation-rated will
need to be
 Elevating above the current BFE (as shown on the effective FIRM) offers
premium savings today
 Elevation at or above the ABFE offers savings when new maps become
effective
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BW-12 and Rebuilding Decisions
Elevation lowers premiums.
“ZONE A” EXAMPLE
Elevating 3 feet
above the BFE
could lower
premiums
significantly!
Homes built below
BFE could be hit
hard by an increase
to full-risk rates
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BW-12 and Rebuilding Decisions
Future insurance savings can offset higher construction
costs.
“ZONE V” EXAMPLE
ELEVATION /COSTS
(ABFE SHOWS 4’ HIGHER RISK)
4 ft
8 ft
10 ft
Foundation
$18,000
$29,000
$30,000
Flood Insurance/yr
$17,500
$ 7,000
$ 3,500
Mortgage increase + flood/yr
$17,500
$ 7,588
$ 4148
Peace of Mind
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Homeowner
pockets more than
$13,000/year
compared to the
current BFE
Other “V” Zone Considerations
 Waves exert tremendous force; buildings in “V”
zones must offer minimal wave resistance
 Buildings in “V” zones must use pier/piling
construction and be free of obstruction below the
BFE (breakaway walls OK)
 Using these smart building
practices also increases
safety for buildings near
V zones
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Homes With Basements
 Homeowners with basements in high-risk zones
face difficult choices
• Restricted coverage
• High risk of water damage
 Options
• Fill in basement
• Or pay more for flood insurance
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Takeaway: What to Tell Clients
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Communicating With Your Clients
 What else will you communicate to your clients
about flood risk and flood insurance, including BW12 and ABFEs?
 How will you communicate with your clients?
 What additional resources would you like to have?
What is your personal action
plan to get the message out?
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For Additional Information
 Visit www.Region2Coastal.com for many resources, including:
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Increased Cost of Compliance: How You Can Benefit
Increased Cost of Compliance: Creating a Safer Future
Changes in the Flood Insurance Program: Preliminary Considerations for Rebuilding
FEMA Building Science Resources to Assist with Reconstruction after Hurricane Sandy
Hurricane Sandy Advisory Base Flood Elevations in New Jersey and New York
Advisory Base Flood Elevations (ABFE) Frequently Asked Questions
 For information on flood insurance and BW-12
• WYO Bulletins at http://bsa.nfipstat.fema.gov/wyobull/wyobull2012.html
• Call the National Flood Insurance Program Help Center at 1-800-427-4661
• Visit agents.floodsmart.gov to access additional information as it becomes available.
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