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The National Flood Insurance Program (NFIP) recently announced changes effective April 1, 2020. These changes include:

  • Premiums will increase an average of 9.9%.
  • The Reserve Fund Assessment will increase to 18% and the Severe Repetitive Loss premium will increase to 10%.
  • Primary Residence Determination – when the property address and mailing address match, no additional documentation will be required before issuing the policy as the primary residence.
  • Non-Residential Flood-proofing Credit – FEMA has updated the process and outlined documents needed prior to submission.
  • V-Zone Risk Rating Factor Form – FEMA is discontinuing use of this form.


Below is a breakdown of the premium increase by Flood Zone:

Preferred Risk Policies (PRPs) – Premiums will increase 12.5%

Pre-FIRM Subsidized Policies – SFHA Zones (A, A1-30, AE, AH, AO, AR, AR/A, AR/A1-30, AR/AE, AR/AH, AR/AO, V1-30, VE)

  • Primary Residences +7.5%
  • Non-Primary Residences +23.1%
  • Substantially Improved +23.8%
  • Severe Repetitive Loss (SRL) Properties +24%
  • Non-Residential Business +24.2%


Other Subsidized Policies

  • A99 & AR Zones – Premiums will increase 4.2%


Post-FIRM V Zones

  • V Zones +5.6%


Post-FIRM A Zones

  • A1-30 AE +4.1%
  • AH, AHB, AO, AOB +2.7%
  • Unnumbered A Zones +5.1%


X Zones

  • Standard Rated X zones +3.8%

It’s that time of year. Many residents are heading back to the sunshine state from their northern homes as cooler temperatures have begun to spread across the U.S.

Having been away for several months, there several important reminders your property’s seasonal residents should consider as they head back to their winter residences.

Reminders for Your Associations’ Residents:

  • Let the association know you are back.
  • Inspect your home for weather related, pest, or other damages.
  • Inspect pipes, hose bibs, and washing machines to avoid and detect any potential leaks.
  • Turn on services such as water, phone, and cable.
  • Run the water in all of your fixtures to flush the pipes.
  • Be sure to check the air conditioning system and replace any dirty filters and screens.
  • Check for any evidence of attempted forced entry, including markings on your door frame around the lock and window screens that may have been tampered with, and for missing spare keys.
  • Check that all smoke detectors are functioning and install new batteries.
  • Check the property premises for any problems or deterioration.

 

If you are a returning board member who has been away for the summer, then there is probably work to be done for the association. Have an assessment meeting with your board and property manager. Discuss any concerns that have arisen over the past couple of months and solutions to explore that will improve the community.

For many associations, insurance premiums are the largest overhead cost, so it’s very important to accurately forecast any changes for the coming year. Each year, we review market conditions and trends that may impact your insurance renewal premiums, providing you with an educated look at how they may increase or decrease your association’s budget. Below, we are breaking down what you can anticipate for the remainder of 2019, including current renewals, and as you begin the budget planning process for 2020.

Property/Hazard Insurance Rates:
For the past several years, beginning in 2014 and continuing through 2018, we have generally experienced decreasing property premiums and improved coverage terms. This type of environment is known as a “soft” market. By the end of 2018, the property market began to show signs of firming. That continued into the first quarter of 2019. This trend has continued through the second quarter and appears to be accelerating more significantly than initially expected.

Adverse loss development from recent catastrophic events and an increase in the cost of reinsurance have been catalysts for this acceleration. Two consecutive years with combined loss ratios exceeding 100% has heightened the focus of management and underwriters to reduce aggregate exposure and increase rates.

In addition to rate increases, we are witnessing tightened risk selection, reduced capacity, increased deductibles, and policy form revisions. Some carriers are approaching New Business and Renewals differently and might be more aggressive offering a New Business quote vs. a Renewal quote, for essentially the same risk. Insurance carriers are utilizing a level of underwriting discipline we have not seen in a while.

  • At this time, our recommendation would be to budget for an increase of 10% to 30% for rates, and 5% to 10% for appraisal increases.
  • For coastal communities with losses and/or older structures, you should anticipate an increase on the higher end of this range.


Ancillary Coverage: (General Liability, Crime, D&O, Excess Liability)
We continue to expect these lines of coverage to remain relatively “flat” with the exception of General Liability and Umbrella. Due to adverse loss experience (severity and frequency), compounded by water damage subrogation claims from Personal Lines carriers, some carriers are pricing themselves out of this market. Others are adding restrictive endorsements, such as a Weapons/Firearms Exclusion, which basically forces agents to move carriers.

  • We recommend that you budget for a 10% premium increase for General Liability and Umbrella.


Flood Insurance Rates (NFIP):
As of April 1, 2019, there were changes to the NFIP that will affect both new and renewal policies.

  • Base premiums will increase an average of 7.3% after surcharges and fees. (As always we caution not to use this 7.3% to estimate any specific policy increase as this is an average of the NFIP’s many varying rate increases and policy types.)

The National Flood Insurance Program (NFIP) just announced changes effective April 1, 2019 and January 1, 2020. The changes outlined below apply to new business and renewals that will become effective on or after April 1, 2019. The premium changes for Preferred Risk Policies (PRPs) and Newly Mapped procedure policies will become effective January 1, 2020.

Premium Increases and Surcharges
Average increase of 7.3%. These amounts do not include the HFIAA surcharge or the Federal Policy Fee (FPF).
For policies issued on or after April 1, 2019, there will be no changes to:

  • Deductible Factors
  • Federal Policy Fee
  • Reserve Fund Assessment
  • HFIAA Surcharge
  • Probation Surcharge


Pre-FIRM Subsidized Policies (a group of policies in SFHA Zones A, AO, AH, A1-30, AE, A99, AR, AR/A1-30, AR/AE, AR/AO, AR/AH, AR/A, V1-30, and VE, that receive rates insufficient to pay the anticipated losses and expenses for that group)

  • Other Pre-FIRM Subsidized Policies Not Subject to 25% Annual Increases: These are primarily condominium policies and multifamily policies. Premiums will increase 9%, with a total amount billed increase of 8%.


V Zones (coastal high-velocity zones)

  • Rate increases are being implemented again this year as a result of the Heinz Center’s Erosion Zone Study, which clearly indicates that current rates significantly underestimate the increasing hazard from steadily eroding coastlines.
  • Post-FIRM V Zones: Premiums will increase 6%, with a total amount billed increase of 6%.


A Zones (non-velocity zones, which are primarily riverine zones)

  • Post-FIRM A1-A30 and AE Zones: Premiums will increase 4%, with a total amount billed increase of 3%.
  • AO, AH, AOB, and AHB Zones (shallow flooding zones): Some policies within this rating category will have premium changes; however, for the entire category the average premiums and total amount billed will remain unchanged.


X Zones (zones outside the Special Flood Hazard Area)

  • Standard-Rated Policies: Premiums will increase 1%, with a total amount billed increase of 1%.

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The growing use of drones by consumers across the U.S. is leading to the adoption of new rules and restrictions by not only government, but also private organizations such as community associations.  Questions regarding safety, property damage, and privacy abound with drones, and associations are responding by establishing clear parameters for their use by unit owners.

Can associations prohibit drones from flying over their property? If a drone operated by an owner or a business falls on another owner’s car, will the board be liable for the damage? Should boards themselves use drones to patrol common areas and spot rule violations? If they do, how should they manage the information and images they collect? How will boards balance the privacy concerns of owners and the desire of others to operate drones and/or have them deliver pizzas and packages to their homes?

These are just some of the questions boards will have to address. While it is too soon to offer definitive answers, a few preliminary observations may help frame the issues.

  • Boards have the authority to adopt rules banning drones in common areas, and some association attorneys think they should do so proactively. Their concern: Boards that don’t control drones now may lose the ability to do so if federal or state laws or regulations broadly permit their operation.
  • Instead of banning drones entirely, which will upset some owners, boards could consider regulations limiting their size or specifying where and when they can land in common areas. Although associations can’t ban the ownership of drones, they can prohibit drones from flying within a specified distance of owners’ units or require drone operators to obtain permission from residents before photographing them or their property.
  • The liability concerns surrounding drones will be large and complicated. Insurance companies are just beginning to evaluate the risks and opportunities in this emerging market. Boards should check with their insurance agents to determine what their existing policies cover and what additional coverages they may need.
  • Even if boards aren’t yet ready to act, they should start discussing policies, procedures and regulations governing drones before they begin fielding the inevitable questions, complaints and law suits related to them. Two years ago, we would have said that drones are coming. Today, we have to say, they’re here. The challenge for community associations is finding ways to live with them.

If an association concludes that it wishes to permit the operation of drones in the community, it should consider the adoption of rules and restrictions to help ensure safety.  These include the establishment of designated take-off/landing sites, restricting their use to daylight hours, developing penalties for violations, and clarifying that the association is not liable for any property damage caused by these aircraft.  Additionally, the association board or management should consult with its insurance agent or consultant to confirm that it is adequately insured with regard to the risks that may be presented as a result of the use of drones at the property governed by the association.