G. Flood Insurance
RECOMMENDATION
COMMENT
G.1a. In addition to current mandatory purchase requirements,
require flood insurance in the 500- year floodplains. If needed to
assist lenders, include it in the definition of SFHA and mark it as a
type of Zone A (e.g. AM)
1a. To make this work, there will need to be a
requirement to include 500-year floodplains in all future
remappings.
1b. Require mapping of other related flood-risk areas, include in the
mandatory purchase requirement-if not already, and charge
appropriate rate:
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Coastal Zone A – require mapping the LiMWA and either
create a new zone (e.g., AC) or provide a surcharge,
Erosion zones – already a zone designation; create rates,
Behind levees (and other structural projects) – get rid of
Zone D and replace with a new zone designation such as
AL; allow preferred risk rates, and
Dam inundation zones – require the mapping of these
areas and the mandatory purchase of flood insurance (e.g.,
create a new zone like AD)
1b. What needs to be weighed in this and 1a. is if it is
easier to change the mandatory purchase portion (except
for Coastal zone) so new zones are not needed or create
new zones.
John: Consider including Coastal A Zones (LIMWA) area in
the definition of Coastal High Hazards. Since the 3 foot
wave is not a CFR, it is a mapping standard. It could be
changed to the 1.5 foot wave or higher without any rule
making.
I think.
G.2. Have mandatory flood insurance requirement apply after
issuance of LOMR-Fs and do not allow basements to be added to
properties receiving LOMR-Fs; however, allow preferred risk rates.
Also, have it apply to LOMAs on properties which had been
required to carry flood insurance other than LOMA-OAS related to
new map changes F.5, K.15, T.8
FEMA has the rating option called “Conversion” where
they can convert the SFHA-rated policy to a PRP to the
last policy effective date and refund the different. They
should evaluate doing that automatically when the
LOMA/LOMR-F is issued and then after they get the
notice that they can drop coverage from the lender, they
can make the decision then. FEMA should also evaluate
not allowing basements to be built for buildings obtaining
a LOMR-F.
G.3a. Ensure the movement to actuarial rates over time continues
for all pre-FIRM buildings, including at rates described in BiggertWaters and allowed for in HFIAA.
We should promote the need for all pre-FIRM buildings to
eventually get to full-risk rates.
b. After the second claim on a pre-FIRM building, it must go on the
25% path to actuarial rates path at renewal.
G.4. Gradually eliminate grandfathered rates by having a surcharge
of 50 percentage after the first claim and then charging actuarial
rates at renewal after the second claim is paid
Rating needs to be simplified here, so like the two claim
rule for PRP eligibility, we should keep it to 2 as well.
There should be no threshold as that may encourage
some fudging of numbers and again makes it more
difficult. The other option is 25% increase starting the
second claim.
G.5. Movement of insurance rates toward actuarial must be
balanced with increased tools, assistance and funding for mitigation
to help homeowners and small businesses with affordability of
No disagreement or changes on this one.
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insurance. This could include means tested vouchers, credit for
mitigation or others means, but must be done carefully to ensure it
does not increase the moral hazard.
G.6. Create more stratification in insurance rates to reflect the
variety in risk within flood zones; this must be linked to providing
tools to insurance agents to simply how they can correctly rate a
policy. The current NFIP approach that results in rates for some
shallow flooded structure to be the same is deeper flooded
structures does not encourage mitigation or development in lower
risk areas.
While there was agreement, there is concern on how this
overly complicates an already complicated program. To
provide more stratification would that require additional
data from the maps/study that is not there or if there, is
not available to agents?
The highlighted part does not make sense.
Bruce: Doesn’t having BFE/BFD and LFE accomplish some
of what is being suggested? I’d suggest deleting this.
G.7.a. Apply mandatory purchase requirement to all non-federally
regulated or insured mortgages
b. Require all lenders to pay the flood loss up to the replacement
cost of the home if in an SFHA and there is no flood insurance
policy. Also no IA will be paid for what a flood insurance policy
would have covered.
G.8. Ensure compliance with NFIP mandatory purchase
requirements; at every-year anniversary of mortgage, and upon
transfer; ensure penalties are applied for violations.
Lenders are to be doing this now (besides maybe the
annual check); so what can we offer differently?
G.9. Revise NFIP regulations to make zone changes effective
immediately, without regard to lender notification or changes in
status of mortgage
Not sure what this means, as when a new FIRM goes
effective, so does the insurance requirement. Are we
suggesting getting rid of the 45-day letter cycle?
Bruce: I’d suggest deleting this.
G.10. Require flood insurance on any structure outside the SFHA
for which two or more damage claims or federal disaster assistance
have been paid due to flooding unless it is mitigated; Also see A.5
After the second loss, it will go to Standard Zone X rates
which in many instances are around the cost equivalent
to Zone AE at BFE.
G.11. Implement law that allows FEMA Director to impose use of
ICC when tying to mitigation efforts
We need to be careful to not create a policy where the
insured purchases a policy for a minimal amount just to
get the $30K ICC. It then no longer becomes an insurance
policy but a cheap grant subsidy program.
G.12. Promulgate insurance rules to financially neutralize repetitive
loss properties through actuarial rates, deductibles, or by actuarial
rates if mitigation is not done after any offer; incentives can be a
part of this effort
This is nice, but it needs meat/direction to give to FEMA
G.13. Set up a procedure by which the NFIP compliance of a
structure is automatically verified after a claim is paid for
There was a concern on tying in CAVs and eligibility due to
timing. In general, claim data should be made available
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substantial damage or even a second or third claim, this should be
used for eligibility in CRS and NFIP? (CAV)
for all FPAs as they are reported in FEMA’s Quick Claims.
This should also be made available to the NFIP SC
G.14. Continually Evaluate CRS to ensure that activities that merit
rate reductions are reducing losses
Nice, but can we give better direction to this one? How?
How often? Independent TF or contractor?
G.15. (a) Establish clear and rigorous audit procedures for CRS
communities compliance, and do this on a set schedule, especially
post-disaster, but also for auditing on a regular basis. CRS
compliance is essential and must carry penalties for noncompliance. All policyholders pay for CRS credits whether in CRS
community or not, at a cost of over $200 million per year.
This is already being done, as they lose their credit if they
aren’t doing what they say they are doing. They have to
yearly report and have a CAV every 3-5 years. A bigger
issue is when FEMA HQ approves inappropriate LOMCs
which undermines CRS communities.
G.15 (b). Require EC’s for all new floodplain permits and require
that the community keep copies and make available publicly, even
if they are not a CRS community.
The challenge is how to police this and what happens if
they don’t?
G.15 (c). Examine potential for community based insurance, multiyear policies purchased by and for the community at-large and
based on actual risk.
G.15 (d). FEMA disaster program could offer or work with the
reinsurance industry to offer communities insurance for their
infrastructure and disaster assistance in general. It should be
required of all communities and could be subject to the CRS
discount. It would cover roads, bridges, waterlines, sewer,
stormwater, power, telecommunication, treatment plants, debris
removal, - basically everything now covered by PA.
This does not belong under NFIP Flood Insurance. It
should be moved somewhere else.
G.16. Continue marketing campaigns for both purchase and
renewal of flood insurance policies; target marketing to
homeowners without mortgages and in areas of low penetration.
Work much more closely with WYOs, state and national insurance
associations, FEMA Regions, CERC Contractor, B&SA field reps, NFP
Training Contractor, NFIP SCs, and local communities where
targeting is occurring so they may leverage what is being done
where.
G.17. FEMA should significantly expand the agent training provided
by NFIP Training Contractor, both the number of courses and topics
(i.e., legislation changes, ICC, mitigation options, non-reg products
like depth grids, Changes Since Last FIRM), as well as in-person
classroom instruction courses. This should also support agent
training that incorporate floodplain management, flood mapping
familiarity, and mitigation, and to require at least 3 hours of
continuing education in flood insurance for license renewal by end
of 2015 for those states that don’t already require it.
G.18. Use outreach, monitoring, and other measures to enforce the
NFIP requirement to identify and insure state- owned and locally-
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Bruce: If the building has not received federal disaster
assistance or does not have a federally-backed loan, they
owned floodprone structures, with required pay back to the federal
treasury and NFIP for non-compliance
can just self-insure it, correct? So, don’t know if this
makes sense to have. So, I deleted it.
John: 44CFR Part 75.1 talks about states that are selfinsured. It list FL, GA, IA, KY, MA, NJ, NY, NC, OR, PA, SC,
TN, and VT. As self-insured states.
The others are supposed to carry policies as I understand
it.
G.19. Improve working relationship among floodplain managers
and insurance industry, with FEMA and the professional
organizations assisting in fostering this relationship
All agree; but this needs to be flushed out more with
some examples.
G.20 Modify the NFIP to require mapping and management of and
to provide erosion/mudslide coverage only where those hazards are
mapped and appropriately regulated, possibly via a surcharge
See 1b.
G. 21 Establish a surcharge for flood insurance on buildings in
floodways
Will grandfathering be applied/allowed
G.22 Establish higher rates for structures in high velocity or erosion
prone riverine areas.
Are these not accounted for already in the maps? If not,
how will this information get to the insurance agent for
rating? This needs to be identified before it is made a
recommendation.
G.23 Review the existing policy base, and continually perform
Quality Assurance, to ensure structures are shown to be within the
appropriate community to prevent policy holders from receiving an
inappropriate CRS discount.
Who is this recommendation to; community? FEMA
HQ/Contractor? This is such a minor issue, it should not
be part of a big policy paper. Maybe a comment in
passing but not a key recommendation.
John: I agree it is a minor issue. I am sure it happens, just
like using a participating county’s CID in the jurisdiction of
a non-participating community.
G.24. Establish a requirement that by 2020 all owners of insured
structures must obtain Elevation Certificates and place on file with
local governments and with FEMA. FEMA, working with local
governments, provides incentives to implement. Provide CRS
credits for communities who do this for all floodprone structures;
also allow use of other cost share funding for this
G.25. Ensure actual cost of flood insurance is communicated clearly
and directly to all policyholders each year, regardless of discounts
or subsidies
See G.15b.
As written, this is a financially burdensome requirement
on the homeowner and FPA. There is no need for them in
NSFHA and why force someone to get it when they don’t
need it.
G.26. Require signoff of all claims over 25% or similar threshold by
community floodplain administrator as part of claims processing for
substantial damage determination and mitigation
This needs to be tied in with G13. All claims data should
be made available as the claims are adjusted via Quick
Claims reporting procedure (e.g., go to FTP site and
download); one comment was they’d like to see the
actual total damages, especially when more than the NFIP
limit.
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While all agreed, it is very vague. We need to be more
specific on what we mean.
G.27. Allow communities direct access to claims data as they are
being processed for use in regulatory processes
See G26 and G13; these should be tied together.
G28. Increase ICC. Also, allow purchasing of additional ICC
coverage up to $150K.
The challenge is that the total still cannot exceed $250K
or $500K.
G29. Provided optional Basement, Additional Living Expense and
Business Interruption at actuarial rates
G30. Direct States to earmark NFIP premium taxes (about 2.5% of
premium are paid to states, but the amount varies state-to-state) to
mitigate high flood-loss buildings.
This is a long shot and don’t know if we wish to include it
G31. FEMA should release an annual report on ICC detailing the
funds expended and what was accomplished with them.
G32.Detailed tracking and enforcement of required flood insurance
on Group Flood Insurance Policies and flood insurance on SBA
Disaster Loans post-Flooding.
Flood insurance should also be required on these SBA Disaster
Loans that are in NSFHAs.
Currently, there is no tracking nor enforcement of GFIP
certificate holders (or subsequent property owners) that
are required to carry coverage after the 3-year GFIP
expires. Likewise, in a research study I was involved with
in 2006, there was no system at the SBA to track flood
insurance on loans, hence no enforcement if they let it
drop.
Finally, if a property owner is getting an SBA Disaster Loan
or IA Grant due to flooding, flood insurance should be
required no matter what zone. If it flooded once, it will
flood again.
G33. Explore offering an alternative rating that would negate
getting an EC but instead use LiDAR
For example, the insurance agent can click on that
structure location on a digital map and be given a “factor”
based on BFE, LiDAR-based elevation of the grade and
then rate the building. If the insured doesn’t like the
premium, they can get an EC and go the route of
traditional rating.
NC will be doing this in the near future
G34. Require flood insurance on all loans regardless of flood zone.
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Ya gotta dream!