Understanding the Ever-Changing Landscape of the National Flood Insurance Program (NFIP)

The NFIP was created in 1968 to allow homeowners in participating communities to purchase flood insurance from the federal government. Most of these participants, 5.5 million by 2010, were located along the coasts of Texas and Florida.

By 2012, both Hurricane Katrina and Superstorm Sandy had devastated large swaths of coastal regions in the United States. The fallout from this was unprecedented rate hikes in insurance policies, some as high as 25 percent.

This in turn led Congress to pass the Biggert-Waters Flood Insurance Reform act in 2012, which extended the NFIP for five years, while at the same time imposing significant reform to the program itself. The reasoning behind Biggert-Waters was that the higher premiums (the highest going to secondary properties located in frequently flooded areas) would help to pay down the $24 billion of debt that the NFIP accumulated after Superstorm Sandy and Hurricane Katrina.

On March 21, 2014, President Obama signed the Homeowner Flood Insurance Affordability Act (HFIAA) into law, to roll back price hikes created under Biggert-Waters after homeowners, lawmakers, and real estate professionals complained.

All of this leads us (finally) to the new NFIP, which was changed by FEMA in 2014. When the new NFIP was rolled out in 2014, it stated that its key priorities were to work with homeowners and real estate professionals to issue refunds, stop rate increases and surcharges, provide accurate mapping, promote mitigation, and work as a flood insurance advocate.

The amount of information that pertains to the NFIP is huge and ever changing. In April of 2015, a summary of changes to the NFIP were released. The changes therein pertained to:

• Premium Increases and Surcharges
• Minimum Retentions
• Property Newly Mapped into the SFHA
• Increased Optional Retentions
• Substantially Damaged/Substantially Improved Structures
• Additional Rating Guidance for Pre-FIRM Buildings
• Clarifications Regarding Property Addresses

An additional set of changes to the NFIP were released in November of 2015. These included:

• Identification of Business Occupancies for Policies Currently Covering Non-Residential Buildings to Implement 25% Increases for Pre-FIRM Subsidized Business Properties.
• Incorporation into the Flood Insurance Manual of Certain Rates for Buildings with the Lowest Floor Below the Base Flood Elevation.
• Changes to the Flood Insurance Underwriting Forms.
• Flood-proofing Certificate for Non-Residential and Business Structures.
• Changes to the Endorsement and Cancellation Refund Rules.
• TRRP Reporting Requirement for Mortgage Portfolio Protection Program (MPPP) Policies.

For more information visit: https://www.floodsmart.gov/

Source: Federal Emergency Management Agency (FEMA)