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Personal Lines FEMA Releases New Flood Insurance RatingFEMA is updating the National Flood Insurance Program’s pricing methodology to communicate flood risk more clearly, so policyholders can make more informed decisions on the purchase of adequate insurance and on mitigation actions to protect against the perils of flooding.

The 21st century rating system, Risk Rating 2.0—Equity in Action, provides actuarially sound rates that are equitable and easy to understand. It transforms a pricing methodology that has not been updated in 50 years by leveraging improved technology and FEMA’s enhanced understanding of flood risk.

“The new pricing methodology is the right thing to do. It mitigates risk, delivers equitable rates, and advances the Agency’s goal to reduce suffering after flooding disasters,” said David Maurstad, senior executive of FEMA’s National Flood Insurance Program. “Equity in Action is the generational change we need to spur action now in the face of changing climate conditions, build individual and community resilience, and deliver on the Biden Administration’s priority of providing equitable programs for all.”

The National Flood Insurance Program provides about $1.3 trillion in coverage for more than 5 million policyholders in 22,500 communities across the nation. Understanding the magnitude of even the smallest changes of a program of this scale, FEMA devoted thousands of hours to develop the new pricing methodology to ensure equity and accuracy.

In developing the new rates, FEMA coordinated with subject matter experts from the U.S. Army Corps of Engineers, U.S. Geological Survey, and the National Oceanic and Atmospheric Administration along with experts from across the insurance industry and actuarial science to ensure alignment with federal regulations, systems, guidance, and policies.

The new methodology allows FEMA to equitably distribute premiums across all policyholders based on the value of their home and the unique flood risk of their property. Currently, many policyholders with lower-value homes are paying more than they should and policyholders with higher-value homes are paying less than they should.

To provide more equity, FEMA now has the capability and tools to address rating disparities by incorporating more flood risk variables. These include flood frequency, multiple flood types—river overflow, storm surge, coastal erosion, and heavy rainfall—distance to a water source, and property characteristics such as elevation and the cost to rebuild.

The cost to rebuild is key to an equitable distribution of premiums across all policyholders because it is based on the value of their home and the unique flood risk of their property. This has been an industry standard for years.

FEMA is conscious of the far-reaching economic impacts COVID-19 has had on the nation and existing policyholders and is taking a phased approach to rolling out the new rates.

  • Phase I: New policies beginning Oct. 1, 2021 will be subject to the new rating methodology. Also beginning Oct. 1, existing policyholders eligible for renewal will be able to take advantage of immediate decreases in their premiums.
  • Phase II: All remaining policies renewing on or after April 1, 2022 will be subject to the new rating methodology.

 

FEMA continues to engage with Congress, its industry partners, and state, local, tribal and territorial agencies to ensure clear understanding of these changes. For the latest information on Risk Rating 2.0, visit fema.gov.

Ron Lazarto, CPRIA is a Client Advisor and Partner at Gulfshore Insurance specializing in Private Risk Services. Ron specializes in offering customized property and casualty insurance solutions for successful individuals and their families. Comments and questions are welcome at rlazarto@gulfshoreinsurance.com

Gulfshore Insurance is a Naples, Florida based insurance agency specializing in home and homeowners insurance, car and auto insurance, boat and yacht insurance, property insurance, umbrella insurance, valuables insurance for fine art, jewelry, wine, and more. Navigating insurance requires an experienced and trusted insurance agent who understands your high net worth risks and exposures. Gulfshore Insurance services Naples, North Naples, Port Royal, Park Shore, Pelican Bay, The Moorings, Naples Beach, Marco Island, Bonita Springs, Sanibel Island, Captiva, Fort Myers, Sarasota, and Southwest Florida. We have office locations in Naples, Fort Myers, Fort Lauderdale, and Sarasota.

Personal Lines Flood Insurance Considerations for Waterfront PropertiesIf you already own a waterfront property, then you are likely familiar with flood zones and flood insurance. If you are someone who is considering the purchase of waterfront property, then now is to time to get familiar with this coverage. Flood risk across the continental U.S. is concentrated along coastlines, and no state has more vulnerable beachfront miles than Florida. Most waterfront properties are considered high risk for flooding, just because of their proximity to the water.

Flood or “rising water” is not a peril that is covered under your typical homeowner’s insurance policy. Flood coverage is purchased as a separate stand-alone policy. The vast majority of all flood policies are purchased through the National Flood Insurance Program (NFIP) which is administered by the Flood Emergency Management Agency (FEMA); however, private options are also available. How much that insurance costs all comes down to the elevation of the building and the characteristics of the flood zone that it resides in.

Properties with direct ocean access are most often located in VE or AE flood zones. These high-risk zones require an elevation certificate before Primary FEMA Flood or Excess Flood quotes can be provided. The elevation certificate provides the base flood elevation as determined by FEMA in addition to the elevations of the garage, machinery, and first-floor living level. Some homes in these areas have elevated living levels which adds to the complexity of the underwriting process. For all areas below the base flood elevation, it’s necessary to confirm whether or not the enclosure is properly vented (in AE zones) or has breakaway walls (in VE zones).

Coverage for waterfront properties can be expensive and intricate, so we recommend looking into this. Interested buyers should be familiar with the complete scope of the house and all that it entails. When your buyers have questions about insuring their coastal property, turn to Gulfshore Insurance for answers. It’s critical to check with an agent early to verify the flood zone and elevation to avoid any surprises after a purchase contract is in place.

Andrea Pelletier, CPRIA, CPIA is Client Advisor and Partner at Gulfshore Insurance specializing in Private Risk Services. Andrea works with successful individuals and their families on creating and customizing package insurance solutions in the areas of luxury homes, car collections, jewelry, fine arts, watercraft, and personal excess liability. Comments and questions are welcome at apelletier@gulfshoreinsurance.com

Gulfshore Insurance is a Naples, Florida based insurance agency specializing in home and homeowners insurance, car and auto insurance, boat and yacht insurance, property insurance, umbrella insurance, valuables insurance for fine art, jewelry, wine, and more. Navigating insurance requires an experienced and trusted insurance agent who understands your high net worth risks and exposures. Gulfshore Insurance services Naples, North Naples, Port Royal, Park Shore, Pelican Bay, The Moorings, Naples Beach, Marco Island, Bonita Springs, Sanibel Island, Captiva, Fort Myers, Sarasota, and Southwest Florida. We have office locations in Naples, Fort Myers, Fort Lauderdale, and Sarasota.

Gulfshore Insurance Flood Insurance Webinar for Realtors on Sept 23 2020

Join us for an informative Flood Insurance webinar where we will discuss the most up-to-date information real estate professionals should know when advising clients on their properties.

In this webinar, we will cover:
• Flood Program Updates
• Insurance Markets & Rate Changes
• FEMA’s 50% Rule
• Map Revisions
• Compliance Considerations

Guest Speakers:
• Andrea Pelletier, CPRIA, CPIA – Client Advisor, Gulfshore Insurance
• Christa Carrera, CFM – Floodplain Coordinator, City of Naples
• Ashley Tharp, AIS, AINS, ANFI – Corporate Training Manager, Wright Flood

Gulfshore Insurance Naples Florida Homeowners Flood Insurance Realtorsregister button copy new

Preliminary Flood Insurance Rate Map Changes & FAQsFEMA recently released preliminary revisions to the Flood Insurance Rate Map (FIRM) in Florida. With many homeowners, unit owners, and associations compelled to purchase Flood insurance annually, this created many questions as to how the revisions may affect policyholders’ premiums. This is a topic that Gulfshore Insurance has been monitoring closely.

The FIRM shows the “flood zone” of a particular area. A building’s flood zone, along with other factors, is a direct contributor to the Flood insurance premium associated with the policy. A lesser risk flood zone can mean significantly lesser premiums. But, for those buildings now preliminary rated in a higher risk zone, it could mean significantly higher Flood insurance premiums. This is especially true for coastal properties. To make matters more confusing, these FIRM maps are extremely detailed. Your property may be moved into a higher risk zone than it previously was, and your adjacent neighbor may remain unchanged.

There is some reassurance. At Gulfshore, your insurance agent is familiar with the nuances of Flood insurance, and they will be able to determine a strategy that puts your property in position for the best possible rates when these maps do finally go into effect.

 

Frequently Asked Questions

When are the new Flood Insurance Rate Maps taking effect?

  • The target date to take effect is late 2021 or early 2022.
  • Local officials point out it could be much later based on hearings and proceedings.
  • At the time of writing this article, local hearings have not yet been held.

 

Who are the new FIRM maps impacting?

  • It is important to understand that each property must be researched independently because FIRM maps are very detailed. Your property may be impacted by the change, but your adjacent neighbor’s may not be.

 

Can I “Grandfather” my property so my flood zone doesn’t change?

  • The preliminary map proposals have not done away with grandfathering and it remains a viable option if it is to your benefit. Your Gulfshore Insurance agent will be researching this.

 

For more preliminary FIRM revision details, visit your county website flood page:

 

Jeff Sanders, TRIP is Client Advisor at Gulfshore Insurance specializing in community and condominium associations. Jeff works with a wide range of business clients to deliver strategic risk analysis and guidance. Comments and questions are welcome at jsanders@gulfshoreinsurance.com

Gulfshore Insurance is a Naples, Florida based insurance agency specializing in business insurance including liability insurance, property insurance, workers compensation insurance, vehicle insurance, business income interruption insurance, cyber insurance, commercial umbrella insurance, and more. Our insurance and risk management advisors are industry specialists for condominium associations, golf and country clubs, oil and petroleum marketers, construction, landscaping, churches and non-profits, and work comp. Navigating insurance requires an experienced and trusted insurance agent who understands your business risks and exposures. Gulfshore Insurance services Naples, North Naples, Marco Island, Bonita Springs, Fort Myers, Sarasota, Lido Beach, Longboat Key, Bradenton Beach, and Southwest Florida. We have office locations in Naples, Fort Myers, Fort Lauderdale, and Sarasota.

Summary of NFIP Program Changes Effective April 1, 2020The 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%