Realtors® and homeowners across the country have been reporting
significant increases in annual premium rates before NFIP rate changes
took effect on October 1; this is raising concerns among consumers and
Realtors® about decreased property values and a stalled housing market
recovery.
Ed Connor, FEMA deputy associate administrator, Insurance, Federal
Insurance and Mitigation Administration, said Congress took action to
reform the NFIP and make it financially sound following several
devastating storms.
“The last two major storms, Hurricane Katrina in 2005 and Hurricane
Sandy in 2012 were the costliest storms in U.S. history,” Connor said.
“Last year, the NFIP was forced to borrow money from Treasury; program
debt is now $24 billion dollars.”
Flood insurance rates are dependent on risk levels, property type and
location. Under the Biggert-Waters Flood Insurance Reform Act, rate
increases for older primary residences go into effect when the policy
lapses, the property is sold or a new policy is purchased.
Rates for commercial properties and non-primary residences are
increasing by 25 percent per year until premiums reach the full
actuarial cost. Changes to flood insurance rate maps in some communities
may also affect the timing of increases, and some could go into effect
immediately.
“This isn’t going to affect property owners in every state to the same
degree,” said Thomas Hayes, FEMA chief actuary, Federal Insurance and
Mitigation Administration. “There are going to be some counties that are
harder hit than others; it’s going to depend on the location of the
property and several other factors.”
Panelists told attendees that under the Biggert-Waters Flood Insurance
Reform Act of 2012, homeowners could save $75,000 or more over 10 years
if they build three feet above base flood elevation. Panelists also
encouraged policy holders to talk to an insurance agent about their
options and to obtain an elevation certificate.
NAR is a strong supporter of the NFIP and believes it is critically
important to Americans and the nation’s economy since it increases the
number of self-insured properties and reduces the cost of post-flood
disaster governmental assistance. However, due to the unprecedented
scope of premium increases, NAR recommends that FEMA take interim
measures to ensure that the NFIP continues on a path towards financial
solvency and actuarial responsibility without damaging the real estate
recovery.
In addition to delaying future premium increases until FEMA submits its
affordability study, NAR recommends that FEMA issue proposed
regulations for installment payments and appeals reimbursement; and that
FEMA work to improve and publicize the Community Rating System program,
which encourages community floodplain management activities that exceed
NFIP’s minimum requirements, and rewards participating communities with
lower premiums.
Other NAR recommendations include streamlining and improving the
process for obtaining property elevation certificates, and improving and
publicizing information and education resources for consumers, real
estate agents, lenders, and insurers, among others.
NAR also calls on FEMA to convene a summit about the impact of premium
increases on property owners. At the summit, industry experts could
develop valuable recommendations for how FEMA could minimize the impact
of future premium increases, strategize ways to help property owners and
communities lower their rates, and discuss ways the real estate
industry can partner with FEMA on those efforts.
Source:The National Association of Realtors®
