What’s behind pending flood insurance premium increases?

Pending National Flood Insurance Program premium increases will affect nearly 18,000 policies state-wide as soon as subsidies of their premium begin to be phased out.

Specific residential and business owners are scheduled to see a 25 percent annual increase in their premiums within the year.

According to the Federal Emergency Management Agency, there are about 486,000 flood policies in the state, with about 82,000 of those being subsidized. The rest already pay the actuarial rates. Of the 82,000, roughly 50,000 are scheduled to keep their subsidies until they sell, get flooded multiple times or let their policies lapse. That leaves 17,978 policies that currently are due to be hit with 25 percent annual increases until true-risk rates are reached.

Congress passed the Flood Insurance Reform Act of 2012, known as the Biggert-Waters Act, which calls on FEMA and other agencies to make a number of changes to the way the insurance program is run. Key provisions of the legislation will require the insurance program to raise rates to reflect true flood risk, and change how Flood Insurance Rate Map updates impact policyholders. The changes will mean premium rate increases for some — but not all — policyholders over time, according to a FEMA fact sheet on the changes to the flood insurance program.

The new law eliminates some artificially low rates and discounts, which are no longer sustainable. Most flood insurance rates will reflect full risk, and flood insurance rates will rise on some policies. Actions such as buying or selling a property, or allowing a policy to lapse, can trigger rate changes.

FEMA said not everyone will be affected immediately by the new law — only 20 percent of policies, up to 97,000, according to the most recent numbers available, receive subsidies. Those who could be impacted by the loss of those subsidies include:

—Owners of non-primary/secondary residences in a Special Flood Hazard Area will see 25 percent increases annually until rates reflect true risk, which began Jan. 1.

—Owners of property which has experienced severe or repeated flooding will see 25 percent rate increases annually until rates reflect true risk beginning Oct. 1.

—Owners of business properties in a Special Flood Hazard Area will see a 25 percent rate increase annually until rates reflect true risk beginning Oct. 1.

Owners of primary residences in SFHAs will be able to keep their subsidized rates unless or until they sell their property; allow the policy to lapse; suffer severe, repeated flood losses; or purchase a new policy.

The Biggert-Waters Act calls for a phase-out over five years of discounts, including grandfathered rates and a move to risk-based rates for most properties when the community adopts a new Flood Insurance Rate Map. Implementation is anticipated in 2014, the fact sheet states.

For more information on the National Flood Insurance Program, including tips on protecting property thereby potentially reducing insurance rates, visit www.fema.gov/national-flood-insurance-program/flood-insurance-reform-act....

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