Biggert-Waters Flood Insurance Reform Act of 2012 (“BW-12”)
and
Preferred Risk Flood Insurance Policies and NFIP Grandfathering
Summary Prepared by Staten Island Legal Services
Preferred Risk Flood Policies (PRP)
The National Flood Insurance Program (NFIP) subsidizes the cost of certain flood insurance policy
premiums in low to moderate risk flood zone areas. Rather than charging the actuarial rate or true risk
rate a private insurance company would ordinarily charge for such coverage, NFIP gives policy holders a
discount on their premium. These policies are referred to as “Preferred Risk Policies” (PRP).
To be eligible for a PRP, the insured home must be in a low-moderate flood zone. In addition a home is
ineligible for a PRP if a set of conditions exist within a 10 year period, known as Flood Loss History.
Examples of disqualifying circumstances are 2 flood insurance claim payments for more than $1,000
within a 10 year period; or 2 FEMA payments for more than $1,000 each within a 10 year period.
PRP EXTENSION:
Prior to January of 2011, when an area’s flood zone mapping was revised into a high risk flood zone,
known as a Special Flood Hazard Area (SFHA), all homeowners in the newly mapped SFHA would lose
their PRP eligibility. As a result these homeowners would have to re-write their policy to the significantly
more expensive standard-rated policy. Beginning January 2011, NFIP implemented a two year PRP
extension. This extended eligibility in the PRP program for areas newly mapped into an SFHA beginning
October 1, 2008. This extension allowed any homeowner who was newly placed into an SFHA since
October 1, 2008 to either keep or purchase a PRP. It should be noted that if the homeowner was placed
into the SFHA prior to October 1, 2008 or is ineligible due to the Flood Loss History (see above), no PRP
extension will be granted.
BIGGERT WATERS ACT OF 2012
In 2012 congress passed the BIGGERT WATERS ACT OF 2012 (BW-12) The main focus of BW-12 is to
phase out subsidized Flood Insurance Rates allowing NFIP to charge the true risk value rates for the
flood policies. BW-12 will change a number rules within NFIP. The following two paragraphs discuss
how most PRP policy holders will likely be affected by BW-12.
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In January of 2013, the previous PRP extension expired. However, under BW-12 the PRP rates will
continue subject to the phasing out set out by BW-12. For most homeowners who currently have a PRP
on their primary residence, beginning on or about October 1, 2014, full risk rates will be phased in at a
rate of 20% per year over a period of five years. FEMA will provide more details for such changes as the
date of implementation gets closer.
In addition, as of October 1, 2013 no PRPs will be sold to any homeowner purchasing a flood policy for
the following types of properties.
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
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Homes purchased after the enactment of BW-12,
Homes in which the prior flood policy has lapsed or
Homes not previously covered by flood insurance with an exception made for those
being placed into an SFHA for the first time.
For those homes placed into an SFHA for the first time, a PRP will be available to them subject to the 5year 20% phasing out.
NFIP Grandfathering
FEMA classifies a given area’s flood risk using the Flood Insurance Rate Map (FIRM). Flood Insurance
premiums are largely based on where on the FIRM a property is located. When the FIRMs change some
properties may go from a low risk area to a Special Flood Hazard Area (SFHA) or FEMA may increase the
Base Flood Elevation (BFE) would ordinarily cause insurance rates to sharply increase. To avoid these
increases homeowners would be forced to raise their homes above the BFE . However, in many
instances NFIP provides a subsidized rate allowing the homeowner to be rated using the previous flood
zone or BFE.
PRE-FIRM POST-FIRM DISTINCTION
Pre-Firm buildings are building for which construction, substantial improvement or substantial damage
occurred on or before December 31, 1974, or before the effective date of an initial FIRM. The initial
FIRM refers to the first time a given area was placed into a FIRM. Post-Firm buildings are buildings for
which construction or substantial improvement occurred after December 31, 1974, or on or after the
effective date of an initial (FIRM), whichever is later. Whether a building is Pre-Firm or Post-Firm will
affect its ability to be Grandfathered and how changes enacted by the Biggert Waters Act Of 2012 apply
to it.
GRANDFATHERING ELIGIBILITY
Grandfathering Eligibility varies depending on whether a building is Pre-Firm or Post-Firm as explained
below.
(a) Pre-Firm Eligibility
A Pre-Firm property is eligible for Grandfathering if a flood policy is in effect at the time the new FIRM
becomes effective. If the property is being mapped into a SFHA for the first time, the homeowner must
purchase Flood Insurance before the new FIRM becomes effective.
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For example, a house was built in 1980 and has not been substantially damaged or improved since the
original construction. The initial FIRM’s effective date was in 1984 at which time the home was mapped
into Zone X. On May 7, 2012, the FIRM was revised to an SFHA. In this case the property is Pre-Firm
because construction or substantial improvement took place before the initial FIRM. Therefore, this
property will be grandfathered into Zone X as long as the homeowner purchased Flood insurance before
May 7, 2012 and maintains continuous coverage at all times following May 7, 2012.
If, however, On June 7, 2012 the home is substantially damaged, the property will lose its Pre-Firm
classification and can no longer be Grandfathered as a Pre-Firm property.
(b) Post-Firm Eligibility
Post-FIRM buildings are eligible to be grandfathered into a previous FIRM if one of the following two
conditions is met. (i) The homeowner has a policy in effect at the time of the change in FIRMs and then
maintains continuous coverage; or (ii) The home was built in compliance with the flood zone in effect at
the time of construction (usually demonstrated with an Elevation Certificate). Under this second
condition, if the home has been substantially damaged or improved, the grandfathered flood insurance
premium will be based on the flood map in effect at the time of such damage or improvement.
For example, a home is built in 2000. At the time of construction, the property is located in an SFHA with
a BFE of 10. The homeowner obtains an Elevation Certificate demonstrating that the property was
constructed above the BFE and purchases an affordable Flood Insurance Policy. In 2010 FEMA revises
the FIRM and the BFE is increases to 12 placing the home below the BFE. This homeowner can
demonstrate eligibility using either of the two criteria mentioned above. The homeowner can either
present the elevation Certificate confirming that the home was originally built above the BFE or provide
documentation proving that there has been continuous Flood Insurance coverage effective before the
date of the FIRM change. Once eligibility is confirmed the Flood Insurance premium will continue to be
rated using the BFE 10.
BIGGERT WATERS ACT OF 2012 (BW-12)
In 2012 congress passed the BIGGERT WATERS ACT OF 2012 (BW-12) The main focus of BW-12 is to
phase out subsidized Flood Insurance Rates allowing NFIP to charge the true risk value rates for the
flood policies. BW-12 will change a number rules within NFIP. The following two paragraphs discuss
how grandfathered policies will likely be affected by BW-12.
(a) Beginning October 1, 2013, the following 1-4 family primary residences will receive a 25% rate
increase each year until premiums reflect full risk rates.
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Severe Repetitive Loss Properties which refers to 4 or more Flood Insurance claims for
more than $5,000 each.
Properties that have submitted 2 or more claims where the cumulative amount of such
claims exceed the fair market value of the property.
(b) Beginning October 1, 2013, the following properties will no longer be eligible for grandfathering

Any property not insured as of the date of enactment of BW-12 (except for properties
not yet in an SFHA as of that date)
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Any property where the Flood Insurance has lapsed
Any property that has been purchased after the date of enactment of BW-12
(c) Beginning on or about October 1, 2014 all other grandfathered policies and policies newly mapped
into an SFHA will be phased into full risk rates over 5 years at a rate of 20% per year.
For more information, contact Margaret Becker at Staten Island Legal Services, 718-233-6484,
mbecker@silsnyc.org
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