NFIP Oct. 1 Changes Announced

ASFPM Flood Insurance Committee Co-chairs
Bruce Bender and Steve Samuelson Share NFIP Oct. 1 Program Changes

FEMA implemented some minor
updates to the NFIP Oct. 1. Two notable changes are:

Re-establishing the ability to
cancel an NFIP policy when a policyholder has a non-NFIP policy. This allows for an insured to
switch to a private flood insurance policy if their agent provides cheaper
coverage (and it is acceptable to the lender). While an entire article can
(and has been) written on the pros and cons of private flood insurance,
this is a “buyer be aware” situation as cheaper is not always better!

Extending Eligibility for Newly
Mapped Rating Procedure.
Previously, properties newly identified to be in an SFHA were eligible for
the “newly mapped” rating procedure if the applicant obtained coverage
that is effective within 12 months of the map revision date. Effective
Oct. 1, 2018, FEMA expanded the eligibility to be either within 12 months
of the map revision date or within 45 days of initial lender notification
if the notification occurred within 24 months of the map revision date. Bottom line: the property owner
should be encouraged to purchase a Preferred Risk Policy BEFORE the new
maps take effect because the risk is higher, even though the maps aren’t
effective.

Another notable change
occurred Oct. 1, 2018. In the past, FEMA limited the ability for companies that
wrote the NFIP flood policies on FEMA’s behalf (known as Write Your Own
companies, or WYOs) to also write private flood insurance policies. This
limitation was removed in the latest version of the annual arrangement that
each WYO signs with FEMA. While that opens up the opportunity for more
companies to potentially join the private flood market, it has not been holding
back the market’s growth–the residential private flood insurance market has
gone from about 10 companies just six years ago to nearly 60… and growing.

FEMA also released an Oct.
1 Bulletin announcing the planned changes to the
NFIP that will be implemented April 1, 2019 (and Preferred Risk Policies
changes Jan. 1, 2020). Highlights include:

An 8.2% premium increase (on average), resulting in
an average premium of $1,115. Post-FIRM Zone “A” rates will see increases
of 0-3%.
PRPs will increase 5% Jan. 1,
2020 and the Newly Mapped procedure multiplier will be 15%, as in the
past. The estimated average per policy will be over $1,000 for the first
time.

A Severe Repetitive Loss premium for all policies
covering properties with an SRL designation is being introduced. The SRL
premium will be 5% for all SRL policies.

FEMA is updating Primary Residence Determination
Guidance to allow a 2-4 family building to be a primary residence for the
purposes of assessing the HFIAA surcharge.

While FEMA is planning to remove the Coastal Barrier Resources System boundaries and Otherwise Protected Areas from the FIRMs as of Nov. 6, 2018, this update does not address how wording may be revised in the NFIP Flood Insurance Manual. This Bulletin is focused only on changes directly affecting rating.