Thursday, March 20, 2014

INFO CENTRAL PRESENTS: Claire Jubb, Charlotte County's Flood Insurance and Community Rating System Specialist

Claire Jubb, speaker (L) and Sally B. Johnson of Info Central
A talk about flood insurance legislation could have been a snoozefest, but Claire Jubb wowed the audience Wednesday, March 19th with a fascinating presentation on the changes to the National Flood Insurance Program (NFIP) and the Flood Mitigation Assistance Program.

She began with a historical overview of flood management, and the shift in emphasis from controlling water on floodplains to reducing flood losses. 

Prior to 1968, there was no flood insurance available and homeowners’ insurance did not cover flood risk. So, in 1968 the NFIP began as an agreement between local communities and FEMA, to regulate development in floodplain in exchange for assistance with identifying areas at risk and providing flood insurance.

Risk areas were mapped as the Special Flood Hazard Area, defined as where there is a 1% chance of a flood to a specific level happening in any year.  These areas are identified by letters: A= risk of sheet flow, V=risk of sheet flow plus wave action of more than 3’.

[An informative explanation from Ms. Jubb on why the ‘breakaway’ regs for structures under our homes: water stopped by an impediment speeds up when it goes around it. This increases the scouring & damage on your home and other homes. Hence, the ‘breakaway’ mitigation.]

Claire then reviewed some important factors in RATES:
  1. Rates are set by the NFIP. This is a national rate for flood insurance premiums.
  2. Rates depend upon the elevation of the structure, whether it is built higher than or lower than base flood elevation.
  3. Another factor is, was it in compliance with flood regulations when it was built? In Charlotte County these regulations did not exist before 1976
  4. NFIP provides a limited level of coverage: maximum $250K for the structure and $100K for the contents.
  5. Rate can be affected by the deductible: you can now opt for a deductible up to $10K.
  6. Flood insurance is required with a federally backed mortgage.
So why the big changes in flood insurance? Because the NFIP is heavily in debt. Due to a combination of huge storm damage payouts, starting with Hurricane Katrina, and the subsidized flood insurance premiums provided for pre-FIRM (built before 1975) structures, the premium inflow was not covering losses.  

THE BIGGERT-WATERS ACT OF 2012 was designed to help make it solvent again.  Since the legislation rolled out in stages, the impact wasn’t felt until October of 2013.  The biggest impact was the 25% per year increase in premiums until the policy reached actuarial rates.  This affected structures built before 1975, with an elevation below base flood. The lower the structure, the higher the premium.

The immediately impacted structures are:
  1. Non-primary residences, including secondary residences, rental and investment properties. FEMA defines a primary residence as a home lived in by the owner or spouse more than 80% of the year.  This home cannot be rented. You will be asked to declare this policy for a primary residence on the application form.
  2. Non-residential structures, including commercial and investment properties.
  3. Severe repetitive loss structures: structure with a history of flooding, general 2 or more flood events.
Florida was particularly hard-hit by B-W2012.  The state has nearly 40% of all flood policies, and pays 30% of the insurance premiums, but has collected on only 7% of the claims. In addition, the average home price of pre-FIRM houses is $122K, which made the premium increases overwhelming to most homeowners.

THE MENENDEZ-GRIMM ACT OF 2013 repeals certain increases for primary residence properties.  The most important elements are:
  1. New purchasers for primary residences can assume the previous owners flood insurance policy.
  2. Restoration of grandfathering: if your home was built (after 1975) in compliance with the flood insurance maps at the time, you will not see the series of 25% increases come into effect.
  3. Limits annual premium increases to no more than 18% per year.
  4. Strives to keep maximum premium rate to no more than 1% of the insured value of the property (max $2500/year)
  5. Requires FEMA to refund premiums that were paid under the B-W Act increases, but they were given 8 months to come up with a way to pay the refunds.
  6. FEMA is allowed an annual premium surcharge of $25/year per residential & $250/yr per commercial property effective 10/2015. This will be applied to the FEMA reserves.
  7. Allows for a monthly installment plan outside of an escrow account to pay the premium.
  8. Adds an optional higher deductible (presently maximum of $5K) up to $10k, but on mortgaged properties the lender must agree.
  9. Accounts for flood mitigation by giving credit for improvements that help to minimize losses. 
  10. Reinstates the 50% rule (substantial improvement limit) which had been reduced to 30% by B-W2012. If you remodel more than 50% of the value of your home you must bring it into full compliance.
  11. Allows FEMA to request a 5% increase on top of the 18% annual cap for the catastrophic reserve fund.
  12. FEMA must conduct an affordability study within 18 months, and was given 2.5 million to conduct the study.
  1. Talk to your insurance agent. Each policy must be reviewed individually for how the new regs impact your premiums. Claire suggested that if you are looking for what your long-out rates might be, make sure you have your base elevation, your flood zone letter (A, V) and the height of the first floor of your house.
  2. Get an elevation certificate for an ACCURATE insurance quote. Without it, you are getting a worst-case estimate.  If your home was built after 1983, Claire can get a copy from the County files. (before 1983 might be sketchy, but you can contact her anyway) It costs $150-$300 to get a flood elevation certificate.
  3. Consider remodeling or rebuilding for compliance. Talk to the County Mitigation staff – contact information is at the end of the powerpoint handout.
Ms. Jubb then spoke about the point-based rating system, whereby counties and local communities get discounts on flood insurance policies in their areas.  Much of this has to do with the regulation of development in the floodplains. Charlotte County mitigation programs like demolishing structures in flood-prone areas, and buying land to dedicate to open space, help increase the discounts given on flood policies here. In fact, CC is one of 16 counties in FL with a “Class 5” distinction, earning a 25% CRS discount.

Claire ended her presentation with a description of mitigation grants available to homeowners to help them upgrade their homes to comply with flood regs.  These are competitive grants that are disbursed by the County based on a cost-benefit analysis. For more information, you can contact Claire at the County.

From our membership:
"What a good presentation!  Thanks to PIE for bringing it to us."
Jeanne Ryskamp

Read more about it:
Presentation Handout (.PDF of Powerpoint presentation plus summary of changes to the National Flood Insurance Program)
Presentation Powerpoint (.PPTX only, for use with Powerpoint software)
Article with summary of changes to the NFIP: “Senate Approves Bill to Curb Flood Insurance Hikes” March 13, 2014 from Insurance Journal online.

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