Recent NFIP Changes
A number of rate changes have been implemented in 2008 to make the National Flood Insurance Program (NFIP) more actuarially sound and to make available new coverage options for property owners eligible for Preferred Risk Policies. Also several procedure changes were made to better serve stakeholders and policyholders.
Preferred Risk Policy
More than 25 percent of all NFIP policies are Preferred Risk Policies (PRPs). The PRP is available only in low- to moderate-risk flood zones. As of May 1, 2008, PRP eligibility was expanded to include more coverage options for residential condominium units and “Other Residential” and “Non-Residential” properties. For example, owners of Other Residential properties (such as apartment buildings, assisted living facilities, etc), who in the past were eligible only for contents coverage, are now eligible for building coverage as well. Owners of Non-Residential properties (such as small businesses, churches, schools, etc.) are eligible for higher limits of coverage and can mix and match building and contents coverage limits.
Procedure Changes
In keeping with the policy being implemented throughout the Federal government to eliminate the Social Security Number (SSN) as the standard identifier on Federal forms, the agent’s SSN and insured’s SSN have been removed from the Flood Insurance Application, Preferred Risk Policy Application, General Change Endorsement Form, and Cancellation/Nullification Request Form.
A new box is now being required on Write Your Own Company flood application and endorsement forms to indicate when flood coverage is a lender requirement without a waiting period.
WYO Companies are now required to obtain eligibility recertification of PRPs at renewal when a map change made during the policy term may affect the policyholder’s property.
Rate and Fee Changes
Premium increases averaging 8 percent were implemented for all classes of NFIP policies written or renewed on or after May 1, 2008. Rate changes in specific zones and for special policies are addressed below.
To fund additional flood mapping efforts, the Federal Policy Fee increased from $30 to $35.
The PRP also got its first rate increase since June 1998. PRP rates went up 8 percent. In addition, there was an increase from $1 to $6 per policy in the rate for Increased Cost of Compliance coverage included in each PRP.
The Community Rating System (CRS) discount on NFIP policies has been eliminated for Post-FIRM structures located in Special Flood Hazard Areas where the lowest floor elevation used for rating is at least 1 foot or more below the Base Flood Elevation. An exception to this change has been made for Post-FIRM V-Zone buildings with unfinished enclosures with breakaway walls and the machinery or equipment servicing the building is at or above the Base Flood Elevation.
Mortgage Portfolio Protection Program
A premium increase of approximately 15 percent will be implemented for lender-placed policies.
NFIP May 1, 2008, Premium Increases
Premiums increased an average of 8 percent for policies written or renewed on or after May 1, 2008. This premium increase varied by zone as described below.
V Zones (coastal high-velocity zones)
Larger rate increases were 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 increased 10 percent.
- Pre-FIRM V Zones: Premiums increased 10 percent.
A Zones (non-velocity zones, which are primarily riverine zones)
These increases keep Post-FIRM rates at actuarial levels and slightly decrease the amount of subsidy in Pre-FIRM rates.
- Post-FIRM A1-A30 and AE Zones: Premiums increased 6 percent as indicated by the NFIP actuarial rate model.
- Pre-FIRM AE Zones: Premiums increased 9 percent.
- AO and AH Zones Premiums increased 10 percent.
- AOB and AHB Zones (shallow flooding zones): Premiums increased 6 percent.
- Unnumbered A Zones (remote A Zones where elevations have not been determined): Premiums increased 8 percent.
- A99 Zones (approved flood mitigation projects, e.g., levees still in the course of construction): Premiums increased 10 percent.
- AR Zones: Premiums increased 10 percent.
X Zones (zones outside the Special Flood Hazard Area)
- Standard Risk Policy: Premiums increased 10 percent.
- Preferred Risk Policy (PRP): Premiums increased 8 percent.
Mortgage Portfolio Protection Program (MPPP)
- Premiums increased about 15 percent.
